WATCH OUT FLORIDA RETIREES--HIGHER YIELDS INVOLVE GREATER RISK

The prospect of several more years of extremely low interest rates is causing people who depend on interest income to accept Wall Street's recommendations to purchase relatively illiquid and opaque alternative investments like structured products, non-traded REITs, hedge funds and variable annuities. ("Itchy Investors Ramp Up the Risk," Wall Street Journal). Regulators worry that the increased risks associated with such investments are not being explained to investors.

Interest income is down nearly one-third from peak levels in the third quarter of 2008, according to the article. Four-year certificates of deposit are paying an average of 0.88 per cent while inflation is about 2 percent. The last prolonged period of low interest rates occurred 60 to 70 years ago when one-month Treasury bills paid 0.7 percent versus a 5.9 percent inflation rate, according to the article.

Stock market volatility is also subject to extreme levels. In 2011, stocks finished the year "relatively flat" after gyrating wildly. In May 2009, the "flash crash" churned investors' stomachs as the Dow lost 1,000 points in minutes.

The wizards of Wall Street continue to churn out structured products, hedge funds, exchange traded products and other alternative investments to enable investors to chase yield despite warnings from the Financial Industry Regulatory Authority (FINRA) that they should not encourage investors to chase yield because of the risks involved.

Individual investors chasing yield are not the only ones who could get burned. Low interest rates are also "pressuring life insurance companies" to chase yield and some life insurers may be taking on more risk than they should.

All investors should remember that increased yields invariably mean increased risk. There simply is no free lunch.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WATCH OUT FLORIDA FIXED INCOME INVESTORS--EXCHANGE TRADED NOTES ARE DANGEROUS!

Investor advocates are saying that more should be done to protect retail investors in Exchange-Traded Notes (ETNs). There is growing concern that with the rising popularity of ETNs, investors and financial advisers are getting into these products without fully understanding them or the risks involved.

ETN's are bank-issued debt securities. They were first brought to market six years ago to allow sophisticated investors to place bets on different parts of the market. Recently, however, retail investors have also started trading ETNs to gain access to certain market segments, such as those involving gold, silver, or natural gas. ETN offerings have grown in number over the past few years, with 212 ETNs now found on exchanges.

Unlike ETFs (exchange-traded funds), ETNs are not investment portfolios. They are contracts involving issuers that have agreed to pay investors returns equivalent to the investments being tracked.
ETNs issue unsecured securities that promise delivery of an index's return. The issuer usually uses derivatives connected to the index to cover their shareholder obligations. When an issuer cannot pay back the note, however, it is the investors that lose money.

An issuer may also choose to stop making or redeeming shares, which can cause the ETN to unhinge from the index or security it is supposed to track. Also, the notes are usually pegged to bonds, stocks, indexes and other underlying assets, which means sponsors can redeem or create shares to offset distortions in price that can occur when investors sell and buy them.

The US Securities and Exchange Commission (SEC) is reviewing the VelocityShares 2x Daily VIX Short Term ETN (TVIX) that collapsed last week, right after it climbed nearly 90% beyond its asset value. The drop came not long after Credit Suisse stopped issuing shares last month. Now, the Switzerland-based investment bank says it will start creating more shares.

Also known as TVIX, the VelocityShares 2x Daily VIX Short Term Exchange Traded Note is an exchange-traded note that seeks to provide two times the daily return of the VIX volatility index. With the note's value hitting nearly $700 million up from where it was at approximately $163 million in 2011 and now crashing down, the TVIX has taken investors for quite the ride.

The swaying price of the VelocityShares ETN shows the risks that can be created by the disruptions in their demand and supply. When Credit Suisse stopped putting out new shares, the divide between the price of the security and the value of the index it was tracking got even bigger, which led to a supply shortage even as there continued to be a record demand for volatility products that provide a hedge to counter losses on US equities.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WATCH OUT FLORIDA FIXED INCOME INVESTORS--NON-TRADED REITS ARE BOTH ILLIQUID AND UNSAFE!

Investors are encouraged to be extremely wary of non-traded REITs. Recent developments have shown that non-traded REITs haven't performed as represented. According to InvestmentNews, "Six notable non-traded REITs on the slide" are:

Behringer Harvard Short-Term Opportunity Fund - down 96%
Cornerstone Core Properties REIT - down 71.88%
Behringer Harvard Opportunity REIT I - down 58.80 %
Behringer Harvard REIT I - down 53.60%
KBS Real Estate Investment Trust Inc. - down 48.40%
Inland Western Retail Real Estate Trust Inc. - down 30.50%.

Susan Fox, age 63, learned that the hard way. She invested 54% of her IRA in two non-traded REITS at the recommendation of her investment advisor, John Potts of Plano, Texas. The first REIT, Inland American Real Estate Trust, has declined 28%. After seeing that REIT decline, she met with Mr. Potts at her home to discuss her concerns. Mr. Potts promptly sold her another non-traded REIT - Cornerstone Core Properties REIT.

Ms. Fox told InvestmentNews: "My recollection was that he deflected talking about Inland. He was talking over my head and said that [Cornerstone] was a better investment with a better, reputable company, and it would pay dividends. He had a lot of paper spread out on the table. He had all the documents ready for me to sign, and I signed them."

Ms. Fox was recently informed that the Cornerstone Core Properties REIT had been devalued from $8.00 per share down to $2.25 per share - a 72% decline.

Mr. Potts is associated with a broker-dealer named Berthel Fisher & Co. Financial Services, and also with a company called "Pre-Paid Legal," according to the Financial Industry Regulatory Authority (FINRA).
Cornerstone takes the position that "the recent global economic downturn," rather than its own mismanagement, is to blame for the 72% decline. Bertel Fisher says it investigated Ms. Fox's complaint and found it (and Mr. Potts) did nothing wrong. FINRA likewise responded to Ms. Fox's complaint with a shrug.

Tony Webb, a research economist with the Center for Retirement Research at Boston University, sees things differently. He was quoted as saying that "the level of risk wasn't appropriate for the client," adding: "I don't know the client's financial situation, but it strikes me, at first glance, of being an inappropriate investment."

Non-traded REITs have been widely sold to retirement accounts. They are widely sold because the sellers put their own interests ahead of their clients. Non-traded REITs pay high commissions to the seller, but given their illiquidity and risk, they are usually not in the best interest of the purchaser.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

SENIOR INVESTORS THROUGHOUT FLORIDA AND NATIONWIDE--YOU ARE TARGETS!

"Complaints [involving seniors and financial scammers] are rising," according to Jack Herstein, president of the North American Securities Administrators Association (NASAA) and assistant director of the Nebraska securities regulator. Mr. Herstein added that the increased number of complaints is partly responsible for the increased number of enforcement actions. The association of state securities regulators reportedly filed 1,241 such enforcement actions in 2010, the latest year for which data has been compiled - more than double the 506 enforcement actions filed in 2009 ("Financial Scammers Prey on Seniors," by Anne Teresen, Wall Street Journal).

Unfortunately, older people make attractive targets for investment scams, in part, because they often have more investable assets, and are more susceptible to sales pitches due to factors associated with aging, such as loneliness and cognitive disabilities, according to the article.

Seniors who must rely on a fixed income to meet expenses may experience financial hardship as a result of today's ultralow interest rates and poor investment returns. They are, therefore, more inclined to be lured by promises of higher returns and private (Reg D) investments, which are often promoted as being stable-value investments - i.e., not correlated with the price movements of traditional stocks and bonds.

Since private (Reg D) investments are unregistered and virtually unregulated, it is easy for scam artists to peddle fraudulent securities that promise attractive returns. State enforcement actions involving unregistered securities, including promissory notes and private placements, exceed those involving traditional stock and bond investments by a factor of five to one, according to NASAA.

In addition to outright fraud, NASAA is seeing more cases of unsuitable investment recommendations being made to those over the age of 50. Examples of unsuitable products include variable annuities, which impose substantial "surrender" charges on investors who seek to liquidate their investments within a set number of years of the purchase date.

"Someone who is 85 should not be sold a variable annuity with a 15-year surrender charge. That's not suitable," Mr. Herstein was quoted as saying.

Elderly victims of financial abuse lost $2.9 billion in 2010, up 12% from $2.6 billion in 2008, according to the article, citing a study by MetLife Mature Market Institute. "[M]any of these cases go unreported," Institute director Sandra Timmermann was quoted as saying.

Adult children are often in the best position to recognize potential investment fraud and take preventive or corrective action. It may be beneficial for seniors to sign up for the National Do Not Call Registry (888-382-1222) in order to minimize unsolicited calls from potential scammers. What to do with the telemarketing calls that make it through anyway? Just hang up on them - without saying a word. Zero tolerance for unsolicited sales calls is the best policy.

Depending on the circumstances, adult children may offer to monitor a parent's bank, brokerage and credit-card statements. "You might volunteer to help a parent go through the bills," Ms. Timmermann was quoted as saying. (On the other hand, the financial abuser is sometimes an adult child, so this can be a complicated, touchy subject.)

Unpaid bills, an increase in the use of ATM or credit cards, or disappearing valuables are red flags that may signal a serious problem, according to the article.

For more information, the article refers those who suspect financial abuse to www.eldercare.gov, 800-677-1116 for a referral to adult protective services, local police departments, and state securities regulators, which can be found at www.nasaa.org.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

DAVID LERNER ASSOCIATES AND SLOPPY "POPPY" GET NAILED BY FINRA FOR $12 MILLION FOR SALES OF APPLE REITS TO INVESTORS IN FLORIDA AND NATIONWIDE

Over the past 20 years, David Lerner Associates (DLA) has sold $20 billion worth of non-traded Real Estate Investment Trusts (REIT) such as Apple REITs 7, 8, 9, and 10. Although FINRA has taken no formal action on behalf of investors for losses stemming from REITs 7, 8, and 9, it recently ordered DLA to pay $12 million in restitution to customers who purchased Apple REIT 10, a $2 billion non-traded REIT. As the sole distributor of the APPLE REIT, DLA targeted thousands of unsophisticated and elderly customers to sell the illiquid REIT without performing adequate due diligence to determine whether the REIT was suitable for its investors. In its sales campaign, DLA used deceptive marketing materials that did not disclose to customers that the income from the REIT was insufficient to support distributions to investors. FINRA spokeswoman Michelle Ong said that the action is the largest single restitution payment for investors involving REIT sales.

FINRA also fined David "Poppy" Lerner, DLA's founder, President and CEO, $250,000.00 and suspended him from the securities industry for one year, followed by a two-year suspension from acting as a principal. Mr. Lerner made false claims about the investment's return, value, and prospects of the REIT at various DLA investment seminars and letters to clients. FINRA also fined William Mason, the firm's head trader, $200,000.00 and suspended him from the industry for six months for charging excessive municipal bond and CMO markups. Mr. Lerner and DLA consented to the entry of FINRA's findings against them. The fines and restitution put closure on two long-running FINRA investigations into the firm, which has 190 registered representatives and six branches in New York and Florida.

FINRA's first action against DLA started with a FINRA complaint, which alleged that DLA engaged in improper sales practices of Apple REIT 10. DLA sold more than $442 million of Apple REIT between January and December 2011 without performing adequate due diligence in violation of its suitability obligations. Earlier Apple REITs under the same management wrongfully valued the REITs shares notwithstanding years of market fluctuations, performance declines, increased leverage, and excessive return of capital to investors. FINRA has required DLA to hire independent consultants to review and propose changes to its supervisory systems and training of non-trade REITs, and DLA has agreed to changes its advertising procedures and pre-file all advertisements and sales literature with FINRA at least 10 days prior to use.

To date, FINRA has not taken any formal action for restitution on behalf of investors in Apple REITs 7, 8, and 9. This does not mean that Apple REIT investors cannot make personal claims for their losses. Investors who have suffered losses in Apple REITs 7, 8, and/or 9 are encouraged to, and are certainly entitled to, file arbitration claims for damages against DLA in order to recover their lost principal.

Have you suffered losses in Apple REITs 7, 8, and/or 9 sold by David Lerner Associates? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WATCH OUT FLORIDA INVESTORS--TOO MANY FINANCIAL ADVISERS THROUGHOUT THE UNITED STATES FAIL TO ACT PROFESSIONALLY!

Investors sometimes hire a financial adviser to manage their money professionally if for no other reason than to escape their own irrationality. Many investors know that, in investing, their emotions can be their worst enemy - leading them to buy high and sell low. They think that a financial adviser, detached from their emotions, will behave more rationally and act in their best interest. Unfortunately, a recent undercover academic study concluded that many financial advisers are too detached from their clients and too attached to their own financial interests to provide professional financial guidance. ("Financial Advisers Flunk Undercover Sting," Ryan Sager, SmartMoney.com).

Economists from Harvard, MIT Sloan School of Management and the University of Hamburg hired and trained a group of actors and turned them loose to make 300 visits to Boston-area financial advisers, posing as clients and presenting various portfolios for review and analysis by the financial advisers. This occurred over a five-month period in 2008.

For some reason, the economists expected that the advisers would exhibit "catering behavior" - complimenting their new clients on their portfolios to build rapport and advising them to stay the course. What they found was very different.

"[T]hey largely found that the advisers were willing to recommend big changes fairly quickly." "Most strikingly, the advisers nudged people in low-cost index funds toward high-fee actively managed funds -- blatantly making their clients worse off. Presented with the index-fund portfolio, the advisers recommended a change in strategy more than 85% of the time. Meanwhile, advisers largely encouraged returns-chasers to keep chasing returns."

The economists concluded that the lesson to be learned from all of this is that it is very important for investors to understand how their financial adviser is getting paid. If they are making money from commissions and fees from selling products, they are incentivized to push those products whether they are appropriate for their client or not, a clear conflict of interest. Financial advisers may overcome this incentive and recommend, say, an index fund that pays them next to nothing, but 85 percent of them in the study did not act in their clients' best interest.

Unfortunately, the authors observed, most of us are no better at picking advisers than we are at managing our money.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

NASAA WARNS INVESTORS THROUGHOUT THE UNITED STATES ABOUT CROWD FUNDING INVESTMENTS

The North American Securities Administrators Association (NASAA), an organization comprised of the 50 state securities regulators, believes that the crowd funding provisions of the so-called JOBS Act are just another "Regulation D-like rip-off," according to InvestmentNews ("Crowd funding draws scorn from NASAA," by Mark Schoff Jr.). Regulation D provides a registration exemption for certain investments that are privately offered - i.e., not offered by means of a general solicitation to the public at large.

Under the JOBS Act, start-ups with no track record can raise up to $1 million online annually, via a public offering, without having to register with the U. S. Securities and Exchange Commission (SEC). In addition, the Act allows so-called emerging growth companies with less than $1 billion in revenue to make public offerings with no SEC registration.

Between 2007 and 2010, securities law violations related to private (Reg D) offerings resulted in 580 state enforcement actions, and were the leading regulatory problem in 2010. Part of the reason for this is the fact that state regulators are preempted from imposing a regulatory review requirement on private (Reg D) investments before they are offered to investors. State regulators will likewise be preempted from regulating crowd funding investments because the SEC is in charge of regulation.

But that could be a problem given lack of funding, inadequate resources and other problems at the SEC. "Based on the [Securities and Exchange Commission's] previous track record and their limited resources, this is a mandate the agency is not in a position to fulfill and hence an investor protection disaster waiting to happen," Jack Herstein, president of NASAA, wrote in a letter to Senators last month.

Other state regulators agree (as do some investment advisers, who cite the inherent risks of investing in unproven businesses and weak regulatory oversight). "I think it's absolutely another Reg D," Heath Abshure, Arkansas' securities commissioner, was quoted as saying, adding: "What this bill potentially does is take the worst parts of Reg D, make them worse and apply them to crowd funding."

SEC Chairman Mary Schapiro also expressed concerns about the JOBS Act, according to the article.
Unlike private (Reg D) offerings, a broker-dealer need not be involved in crowd-funding transactions, which means that there will be no reasonable-basis suitability analysis to protect investors.

"Investors are going to be bombarded with offers to invest. "There's going to be so much noise in this marketplace that legitimate companies are not going to be heard," Mr. Abshure was quoted as saying.
Allan Katz, president of Comprehensive Wealth Management Group LLC, reportedly described the JOBS Act as "a train wreck waiting to happen," and further noted that investors "have a hard time seeing through the clutter, deciding what's legitimate and what's not. You're not going to be able to ascertain all the risks when you're hearing the pie-in-the-sky upside without a downside."

One crowd-funding consultant anticipates billions of dollars in crowd funding offerings in the next 18 months, after the SEC writes the implementing regulations.

Startups reportedly will be able to get a "seal of approval" before they are placed on crowd funding portals if they submit to a background check by a due-diligence company such as the newly formed CrowdCheck Inc.

But how thorough and accurate will such due diligence be, and will all material risks and causes for concern about an investment be communicated to investors? A "seal of approval" could in itself be misleading and lull investors into a false sense of security.

Bottom line - Investors should exercise extreme caution before investing in crowd funding ventures.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WATCH OUT FLORIDA FIXED INCOME INVESTORS--HIGH YIELD JUNK BONDS ARE DANGEROUS!

Junk bonds have benefited both investors and issuers over the past few years, providing borrowers with some of the lowest interest rates ever, while providing yield-hungry investors with better returns than they could receive by investing in investment-grade debt. Junk bonds produce higher yields because of the increased risk of default by the issuer. "But investors run the risk of having the tide turn against them should interest rates start rising. Some analysts have begun suggesting that day could come soon" ("Junk Bonds Feed a Hungry Market," by Matt Wirz, Wall Street Journal).

So far this quarter, 130 companies have issued $75 billion in junk bonds. That is up 12 percent from the same quarter last year and is the most since Thomson Reuters began compiling data in 1980, according to the article. Junk bond mutual funds, along with their ETF cousins, reportedly have seen record inflows of $18.6 billion through March 26.

Supply of junk bonds has picked up in anticipation of higher interest rates. Demand has soared as investors have become less risk averse. Despite the belief that the Federal Reserve will keep interest rates low, experts are warning that they may soon begin to rise. As interest rates rise, bond prices fall, which would be a problem for investors in junk bond mutual funds.

Higher interest rates may also cause the economy to falter, leading to more defaults. "This is the talk of the market," Matt Conti, a manager of high-yield investments at Fidelity Investments, was quoted as saying, adding: "My general view is it's time to be defensive."

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WATCH OUT UNITED STATES ETN INVESTORS--EXCHANGE TRADED NOTES CAN BE EXTREMELY VOLATILE!

While the popularity of exchange traded notes ("ETNs") has surged, ETNs can be extremely volatile, and investors run the risk of losing their entire investment. ETNs reportedly hold $17.4 billion in assets, up from under $5 billion five years ago.

Exchange traded notes issued by Credit Suisse have recently traded at prices that were far above and below the true value of the ETN (See "2 ETNs' manic swings point out peril of use," by Jason Kephart, InvestmentNews). The true value of an exchange traded note (or any fund) is the net value of the tracked (or held) index or other asset. But when an asset gets hot, like ETNs, it can get overbought, and when something happens to dry up demand, it can get oversold. All of this can happen fast enough to make your head spin.

In the case of the Credit Suisse, investors apparently were not warned about, and did not notice or consider the fact that the price per share of the ETNs had risen to values that were far higher than the index they tracked. The dramatic run-up in price occurred when the issuing banks announced they would stop issuing shares of the much-desired ETNs (i.e., when it appeared that supply would dwindle, investor demand spiked and so did the price per share ultimately reaching a huge premium over the value of the index). Then the bank reversed itself and announced it would issue more shares of the ETNs. Demand plummeted and so did the price per share. Investors got whipsawed and lost their shirts.

Exchange traded notes are bank-issued promissory notes (IOUs) that track an index. They differ from exchange traded funds (ETFs) in that ETNs do not actually own or hold the index they track. They are simply notes in which the bank promises to pay the return of an index minus fees. The promise is simply an unsecured debt of the issuing bank. If the bank goes bankrupt, as Lehman Brothers did, the holders of its debt are left with nothing but claims against the bankruptcy estate, which may be worth little or nothing. Thus, ETN investors can lose their entire investment.

The Financial Industry Regulatory Authority Inc. (FINRA), the Securities and Exchange Commission (SEC) and Massachusetts' Securities Division are reportedly investigating the ETN debacle. Charles Schwab & Co. Inc. is said to be considering whether to require that investors be given more specific warnings about the risks of exchange traded notes.

Samuel Lee, an analyst at Morningstar Inc., commented: "It's kind of ridiculous that some of these products are actually out there, with the things they have hidden in the fine print."

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

SEC CRITICAL OF STRUCTURED NOTES VALUATION DISCLOSURES BY UNITED STATES BANKS

The U.S. Securities and Exchange Commission (SEC) is "asking" banks that issue structured notes to improve the accuracy of disclosures to investors, including comparing the sale price to the true (lower) value of the notes at the time of sale. "We believe issuers should consider prominently disclosing the difference between the public offering price of the note and the issuer or its affiliate's estimate of the fair value," the SEC said.

Structured notes are essentially bank bonds bundled with derivatives. Derivatives are contracts whose value is derived from stocks, bonds, currencies and commodities. Thus, structured notes are complex products with no pricing transparency.

Like non-traded REITs, another type of illiquid and opaque alternative investment, structured notes have been misleadingly valued at the purchase price on statements sent to customers when the true value is actually lower.

Structured notes and non-traded REITs have often been sold to investors who do not understand them by selling agents who do not understand them and who cannot explain them properly to investors.
As a result, many investors have unwittingly been induced to invest in high-risk investments at inflated prices.
In a letter that shows the SEC is "onto" the banks' tricks, it asked the bank-issuers of structured notes to explain a number of things to investors, including, among others:

(i) the stated value (purchase price) of the notes at issuance versus the price the bank would actually pay for the notes in the secondary market;
(ii) why the bank uses values on account statements that exceed its own estimate of the true value of the notes;
(iii) what the bank plans to do with the money being lent to it by investors, and how important that money is to the bank's maintaining sufficient liquidity;
(iv) why notes are sold to investors at differing prices, and what type of investor may receive a "better" price;
(v) how often the bank offers to buy back notes from investors prior to maturity, the price paid, and how that price is determined; and
(vi) the fact that the notes are solely the unsecured obligations of the bank-issuer and subject to a bank-issuer's credit risk with no ability to pursue a referenced asset for payment.

The letter was sent by the Office of Capital Market Trends, which is part of the SEC's Division of Corporation Finance. The office was reportedly created in July 2010 and is headed by Amy Starr.

"The SEC finally understands these products," Frank Partnoy, a University of San Diego law professor and former Morgan Stanley derivatives structurer, was quoted as saying, adding: "I'm very encouraged by these questions that the SEC is asking."

Partnoy observed that if banks start making the disclosures that the SEC wants, investor demand for structured notes will decline.

"The secondary market for structured notes is completely opaque, and people don't have an accurate understanding how much they are worth the day after you buy them," Partnoy said.

The Financial Industry Regulatory Authority (FINRA) has admonished its member firms about their responsibilities in supervising sales of "complex products," citing some structured notes as examples. As many as 10 states are reportedly investigating how structured notes are marketed.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FINRA WILL FILE ENFORCEMENT ACTIONS FOR IMPROPER SALES OF ETFS AND ETNS THROUGHOUT FLORIDA AND THE UNITED STATES!

The Financial Industry Regulatory Authority (FINRA) announced plans to file enforcement actions against certain brokerages in connection with unsuitable sales of leveraged and inverse leveraged exchange-traded funds (ETFs), as well as for failure to train their brokers who sell them (see Reuters article by Suzanne Barlyn and Jessica Toonkel entitled "FINRA to bring cases over leveraged, inverse ETFs"). The article cites FINRA enforcement chief Bradley Bennett as the source of this information, and notes that he refused to identify the broker-dealers that FINRA plans to sue.

Bennett reportedly told lawyers at a Practising Law Institute (PLI) seminar in New York that the enforcement actions will "make statements" about how broker-dealers should ensure that registered representatives are properly trained about these complex products and the types of customers for whom they may or may not be suitable.

Leveraged and inverse exchange traded funds are designed to magnify short-term returns of a fund's underlying assets by a factor of 2 or more. They employ derivatives and are generally considered to be unsuitable for ordinary buy-and-hold investors.

FINRA is concerned that brokers are selling these products to long-term retail investors, despite their unsuitability for those investors. FINRA is also concerned that the selling brokers are not properly trained and do not explain the risks of these ETFs to potential purchasers.

"We don't have a qualm with the product," Bennett was quoted as saying, adding: "We just want to make sure that people who are selling them understand them." If brokers do not understand them, they cannot explain to customers how they work or what the risks are.

Leveraged and inverse ETFs have long been on regulators "worry list," but enforcement actions have been rare. In July 2011, the Massachusetts Securities Division filed an enforcement action against RBC Capital Markets LLC and one of its brokers for selling leveraged ETFs to clients who did not understand them. Similarly, in March, FINRA barred a former Morgan Keegan broker for making excessive and inappropriate leveraged and inverse ETF trading in clients' accounts.

Exchange traded notes (ETNs) are also on FINRA's radar screen. FINRA is reportedly examining how firms market and sell them. Last month, Credit Suisse's VelocityShares Daily 2x Short-Term exchange-traded note lost half its value in just two days. FINRA hopes to get "ahead of the curve" before that happens to other investors, according to Bennett.

"Most people agree certain investor protections are required" in this area, Paul Justice, an ETF analyst at Morningstar, was quoted as saying. BlackRock Inc., the world's largest ETF manager, has urged regulators and legislators to require investment firms to clearly explain to investors the risks involving complex ETFs and ETNs.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FLORIDA FIXED-INCOME INVESTORS--WATCH OUT FOR "DEATH PUTS" IN CDS AND STRUCTURED NOTES!

With interest rates stuck at record lows, and retirees or those on the brink of retirement looking for higher yields, Wall Street has capitalized on this dilemma by selling an array of alternative products like "structured notes" that promise higher yields but come with higher (often undisclosed) risks, and by marketing dividend stocks as alternatives to bonds, when, in fact, they are riskier than bonds.

A recent article in the Wall Street Journal by columnist Kelly Greene highlighted another such alternative investment: bonds and certificates of deposit with "death puts." Wall Street is marketing them as a way to allow investors to achieve higher yields without taking on significantly more risk ("Retirees: Pump Up Those Yields," by Kelly Greene, Wall Street Journal).

Death puts simply allow heirs to redeem bonds and certificates of deposit at face value, meaning they get back all the money that originally was invested. The fee paid for that feature is 0.125%.

The death put is supposed to give a senior investor the comfort to buy longer-term, higher-yielding notes and brokered CDs that otherwise might not repay their heirs the entire principal invested, if the heirs sought to redeem them prior to maturity. It should be noted that it is only the heirs, and not the investors, who can use the death put feature. If an investor needed to cash out of a bond or CD with the death benefit feature before maturity, he or she would only get market value, which could be lower than face value if interest rates increase.

The biggest risk is that the issuer of the death put may default on the payments. Most of the issuers of bonds with death puts are financial-services companies, some of whom are on shaky financial ground. The bankruptcy of Lehman Brothers brought home this risk to many purchasers of its "100% Principal Protected" structured notes, which lost almost all of their principal value.

A second risk is the fact that many such notes and CDs are callable prior to maturity, which exposes the investor to interest rate risk should the bond be called and they have to reinvest the proceeds at a lower interest rate.

A third set of risks involves restrictions placed on the availability of the death put. Some bonds must be held for at least six months before the death put can be used. Others limit the amount that a bondholder can redeem at one time or on the number of redemptions allowed in a given year. Most companies, including GE Capital and Goldman Sachs, have a six-month restriction.

Another potential downside is the fact that the death put might not be worth anything if interest rates remain as low as they are now. As the article explains, "if you died tomorrow, your heirs probably wouldn't need to use a death put to redeem bonds at par value, because prices are so high that the bonds likely would be worth at least the face value in the open market."

About $12 billion in bonds with death puts have been issued each year for the past three years. The number is expected to grow about 10% in 2012. They are typically sold through brokerages including Merrill Lynch, Charles Schwab and Fidelity Investments. Death puts are most commonly used on brokered CDs - called a "survivor's option."

As with all bells and whistles that are added to plain vanilla investments, there is a price for death puts and the price is determined by an actuary or other expert employed by the issuer, who uses sophisticated mathematical formulae to set the price. Unless the investor has, or is able to employ, the same expertise, it will be impossible for the investor to tell whether or not the death benefit feature is a good deal or a rip-off. The investor will have to trust Wall Street. Unfortunately, a number of Wall Street firms have repeatedly demonstrated that they put their own interests ahead of their clients and are not worthy of trust.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FINRA FINES MORGAN STANLEY, CITIGROUP, WELLS FARGO, AND UBS $9.1M OVER LEVERAGED AND INVERSE ETFS

Wells Fargo & Co. (WFC), UBS AG (UBSN), Morgan Stanley (MS), and Citigroup Inc. (C) have consented to pay a combined $9.1 million to settle Financial Industry Regulatory Authority claims that they did not adequately supervise the sale of leveraged and inverse exchange-traded funds in 2008 and 2009. $7.3 million of this is fines. The remaining $1.8 million will go to affected customers. The SRO says that the four financial firms had no reasonable grounds for recommending these securities to the investors, yet they each sold billions of dollars of ETFs to clients. Some of these investors ended up holding them for extended periods while the markets were exhibiting volatility.

It was in June 2009 that FINRA cautioned brokers that long-term investors and leveraged and inverse ETFs were not a good match. While UBS suspended its sale of these ETFs after the SRO issued its warning, it eventually resumed selling them but doesn't recommend them to clients anymore. Morgan Stanley also had announced that it would place restrictions on ETF sales. Meantime, Wells Fargo continues to sell leveraged and inverse ETFs. However, a spokesperson for the financial firm says that it has implemented enhanced procedures and policies to ensure that it meets its regulatory responsibilities. Citigroup also has enhanced its policies, procedures, and training related to the sale of these ETFs. (FINRA began looking into how leveraged and inverse ETFs are being marketed to clients in March after one ETN, VelocityShares Daily 2x VIX Short-Term (TVIX), which is managed by Credit Suisse (CS), lost half its worth in two days.)

The Securities and Exchange Commission describes ETFs as (usually) registered investment companies with shares that represent an interest in a portfolio with securities that track an underlying index or benchmark. While leveraged ETFs look to deliver multiples of the performance of the benchmark or index they are tracking, inverse ETFs seek to do the opposite. Both types of ETFs seek to do this with the help of different investment strategies involving future contracts, swaps, and other derivative instruments. The majority of leveraged and inverse ETFs "reset" daily. How they perform over extend time periods can differ from how well their benchmark or underlying index does during the same duration. Per Bloomberg, leveraged and inverse ETFs hold $29.3 billion in the US.

For investors, it is important that they understand the risks involved in leveraged and inverse ETFs. Depending on what investment strategies the ETF employs, the risks may vary. Long-term investors should be especially careful about their decision to invest in leveraged and inverse ETFs.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

MORE BAD NEWS FOR PACIFIC CORNERSTONE CAPITAL AND FLORIDA INVESTORS

The Financial Industry Regulatory Authority (FINRA) is investigating and considering legal action against a "captive" broker-dealer of a real estate investment company for the second time in three years. (See InvestmentNews article by Bruce Kelly entitled "Non-traded REITs' B-D faces another probe").

Pacific Cornerstone Capital is the broker-dealer manager of two non-traded real estate investment trusts that have undergone steep declines in value. Terry Roussel is the firm's owner and Vincent Finnegan is its chief executive officer. The Law Office Robert Wayne Pearce, P.A. recently filed an arbitration claim against the firm and its principal for alleged misrepresentation and misleading statements in connection with one of its REIT deals.

Pacific Cornerstone Capital recently filed to deregister with the Commonwealth of Massachusetts and disclosed that it was "involved with an arbitration proceeding before FINRA and one FINRA investigation," according to the article. Yet there is no mention of another Florida arbitration filed by the Law Offices of Robert Wayne Pearce, P.A. on FINRA's BrokerCheck to date.

FINRA fined Pacific Cornerstone Capital $700,000 in 2009 for misstating material facts involved in the sale of private placements according to the firm's CRD profile on FINRA's BrokerCheck.

"Cornerstone is just in a world of hurt," Tony Chereso, chief executive of FactRight LLC, a consulting and due-diligence firm for alternative investments such as non-traded REITs, was quoted as saying, adding: "First, the regulatory culture at Cornerstone was not strong, and second, they were thinly capitalized. Third, they had layers of costs burdening programs you don't typically see on non-traded REITs."

With FINRA allowing broker-dealers who sell non-traded REITs to use up to 15% of investors' money to pay themselves, it is hard to understand what Mr. Chereso meant by "layers of costs burdening programs you don't typically see on non-traded REITs."

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

CITIGROUP GLOBAL MARKETS FINED OVER FAILURE TO DISCLOSE CONFLICTS OF INTEREST

The Financial Industry Regulatory Authority (FINRA) recently announced that it has fined Citigroup Global Markets, Inc. $725,000 for failing to disclose certain conflicts of interest in its research reports and research analysts' public appearances.

Citigroup failed to disclose potential conflicts of interest inherent in their business relationships in certain research reports it published from January 2007 through March 2010. Citigroup and/or its affiliates managed or co-managed public securities offerings, received investment banking or other revenue from, made a market in the securities of and/or had a 1 percent or greater beneficial ownership in covered companies, and did not make these required disclosures in certain research reports. In addition, Citigroup research analysts failed to disclose these same potential conflicts of interest in connection with public appearances in which covered companies were mentioned.

FINRA found that Citigroup failed to disclose the required information because the database it used to identify and create the disclosures was inaccurate and/or incomplete due primarily to technical deficiencies. In addition, Citigroup failed to have reasonable supervisory procedures in place to ensure that the firm was populating its research reports with required disclosures.

In concluding this settlement, the firm neither admitted nor denied the charges, but consented to the entry of FINRAs findings.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

SEC FINES UBS AG FOR MANIPULATION OF MUTUAL FUND SALES IN PUERTO RICO

It is being reported that UBS AG will pay $26.6 million to resolve U.S. regulatory claims its Puerto Rico-based brokerage unit sold shares in mutual funds without disclosing that it was propping up the price of the funds in the secondary market.

Apparently, UBS Puerto Rico agreed to settle the SEC's charges, without admitting or denying the findings.
The SEC had alleged that UBS Financial Services Inc. of Puerto Rico, starting in 2008, solicited thousands of retail investors, saying a competitive and liquid secondary market contributed to their closed-end mutual funds' performance.

The charges further alleged that when investor demand declined, the brokerage sought to maintain the illusion of a liquid market by buying shares into its own inventory from customers who wished to exit the market. The unit later sold 75 percent of its closed-end fund inventory to unsuspecting investors, withdrawing its market price and liquidity support.

The $26.6 million sanction will be placed into a fund for harmed investors.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WATCH OUT UNITED STATES MUNICIPAL BOND INVESTORS--UNDERWRITERS' DUE DILIGENCE QUESTIONED!

The Securities and Exchange Commission (SEC) recently issued a Risk Alert on compliance measures to help broker-dealers fulfill their due-diligence duties when underwriting offerings of municipal securities.
The alert issued by the SEC's Office of Compliance Inspections and Examinations (OCIE) notes that in recent years there has been significant attention focused on the financial condition of some state and local governments, and cites concerns about the extent of written documentation by broker-dealers of due diligence efforts and supervision of municipal securities offerings.

The alert includes examples of practices used by broker-dealers that may help to demonstrate due diligence and supervisory reviews. These include the use of detailed written policies and procedures, the use of commitment committees, due diligence memoranda, outlines for due diligence calls, recordkeeping checklists, and on-site examination activities. Practices such as these could help a firm show how it is meeting its obligation to perform due diligence, and to support that it has a reasonable belief as to the accuracy and completeness of the Official Statements describing the municipal bond offering.

Brokerage firms have a duty to perform due diligence on any investment prior to recommending it for sale to its clients. As concerns grow that local governments may default on their debt, brokerage firms may have to demonstrate that they performed due diligence on these municipal securities prior to recommending them to their clients.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

SEC CAN SUE MORGAN KEEGAN FOR AUCTION RATE SECURITIES MISREPRESENTATIONS TO INVESTORS NATIONWIDE

According to Bloomberg News, an SEC lawsuit alleging Morgan Keegan & Co. brokers misled investors about the liquidity risk of auction-rate securities was reinstated by a federal appeals court.

The U.S. Court of Appeals in Atlanta said that a trial judge had incorrectly agreed with Morgan Keegan that brokers' verbal comments to four customers weren't "material" misrepresentations or omissions that would make the company liable under U.S. securities law.

The SEC sued Memphis, Tennessee-based Morgan Keegan in 2009, accusing it of securities fraud. The SEC said Morgan Keegan brokers, from late 2007 through the collapse of the market of auction-rate securities in February 2008, told customers the securities "were as good as cash" because they wanted to increase sales.

Notwithstanding these alleged misrepresentations, the market for the securities collapsed when dealers stopped participating in auctions at which interest rates were periodically reset. The investments typically were municipal and student-loan-backed bonds and preferred shares.

Raymond James Financial Inc. recently completed the acquisition of Morgan Keegan from Regions Financial Corp.

The case is SEC v. Morgan Keegan & Co. Inc., 11-13992, U.S. Court of Appeals for the Eleventh Circuit (Atlanta).

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

INLAND AMERICAN REIT UNDER SEC INVESTIGATION

According to the Wall Street Journal, the Securities and Exchange Commission is investigating Inland American Real Estate Trust (Inland American REIT) for potential violations of federal securities laws. According to the report, the SEC is looking at activity of Inland American REIT to determine if the REIT committed violations related to management fees, the timing and amount of distributions paid to investors, and transactions with affiliates.

Inland American is the largest of the non-traded REITs currently available and the investigation casts a large shadow on the non-traded REIT market.

Brokerage firms have a fiduciary duty to perform adequate due diligence on any investment that they recommend and to ensure that the investments recommended are appropriate in light of the client's age, investment experience, net worth, and investment objectives.

The problems we see involving non-traded REITs generally relate to the financial advisor's failure to adequately disclose the risks and illiquidity of these investments (as well as the high commission he/she earned for selling the REIT). REITs typically pay a high commission-often as much as 15% (which often explains the stockbroker's motivation in recommending the REIT investment to the investor). Due to the relatively high interest or dividend offered by non-traded REITs, elderly and retirees are often victimized by those misrepresented and unsuitable investment recommendations.

One of the other main complaints we continually hear relates to the problems in the valuation of these investments. FINRA rules currently mandate that sponsors of non-traded REITs establish an estimated per-share valuation within 18 months after the REIT stops raising money from investors. The problem with this language is that fund raising often lasts for years which results in the per-share valuation potentially remaining unchanged for years.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FINRA FINES MORGAN STANLEY FOR FAILING TO HAVE STRUCTURED PRODUCT SUITABILITY GUIDELINES NATIONWIDE

Morgan Stanley & Co. LLC recently submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $600,000.

Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that it did not have a firm-wide structured product-specific suitability policy. The findings stated that, instead, it had an overall suitability guideline that directed supervisors to consider concentration when reviewing all securities purchases.

The firm issued selling memoranda specific to each of its proprietary structured product offerings; some of the selling memoranda included a 10 percent concentration guideline with respect to the specific issue and a $100,000 minimum net worth recommendation.

The findings also stated that the firm developed standard concentration and net worth guidelines, which were posted on its structured products website. Despite the concentration and net worth guidelines, the firm sold structured products at concentrated levels and to customers who did not meet the firm's minimum net worth recommendation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FINRA FINES RBC CAPITAL MARKETS, LLC OVER UNFAIR CMO MARKUPS/MARKDOWNS TO INVESTORS NATIONWIDE

RBC Capital Markets, LLC recently submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $25,000.

Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that in Collateralized Mortgage Obligations (CMOs) transactions with mostly retail, non-institutional customers, it charged markups and markdowns that were as high as 16.9 percent.

The findings stated that these charges exceeded the firm's own internal guidelines based on the type and maturity of each security. The firm's internal guidelines were intended to ensure that charges were fair, reasonable and compliant with NASD Rule 2440.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

SEC INVESTIGATES INLAND AMERICAN REIT

The SEC recently announced that it is looking at activity of Inland American REIT to determine if the REIT committed violations related to management fees, the timing and amount of distributions paid to investors, and transactions with affiliates. It is unclear at this time what the investigation will mean for the value of Inland American REIT but obviously this is not good news.

FINRA has stepped up its regulation of the sale of REITs and, in particular, the ways in which broker/dealers marketed and sold the products to investors. In many cases, and notwithstanding the risk of REIT investments, broker-dealers marketed these investments as safe and secure.

REITs typically pay a high commission - often as much as 15% (which often explains the stockbroker's motivation in recommending the REIT investment to the investor). Due to the relatively high interest or dividend offered by non-traded REITs like Inland American REIT, retired investors are often attracted to these products. Unfortunately, in addition to be risky investments, non-traded REITs are also illiquid (limiting investors' ability to access their own money for unforeseen expenses). Another problem with non-traded REITs is that broker-dealers are not required to frequently update the current price of the investment. This often leads investors to believe that their REIT investment is doing well even though the widespread real estate market collapse would indicate otherwise.

Have you suffered investment losses in Inland American REIT? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

DID WALL STREET RIP-OFF UNITED STATES FACEBOOK INVESTORS?

Troubling signs that emerged days before the IPO were hidden from the public by Wall Street, according to an article in The Motley Fool by Eric Bleeker entitled "The Tragedy of Facebook: How Wall Street Robbed Main Street." While Wall Street helped Facebook promote its IPO, and brought it public at a falsely elevated price, analysts at the underwriter firms cut their earnings estimates for Facebook. That was unprecedented for an IPO. But it was only disclosed to a few favored clients, while the rest, who were encouraged to buy Facebook stock in the IPO, were kept in the dark. The banks' analysts apparently didn't even cut their estimates based on their own due diligence. A Facebook executive had to tell them they should cut their estimates, according to the article.

After Facebook shares popped up, and then quickly began to sink, while Morgan Stanley, the lead underwriter, was buying shares to try to temporarily prop up the price, underwriters Goldman Sachs and JPMorgan were lending out Facebook shares to be sold short by the few institutional clients who had been tipped off about Facebook's lowered earnings estimates, further exacerbating the slide. So much for Wall Street's claim that it can manage its conflicts of interest while millions of dollars are in play.

Morgan Stanley's buying of Facebook shares did not result in a loss for Morgan Stanley. It sold more shares into the IPO than it bought, and therefore made a profit even though Facebook shares plummeted. Indeed the Wall Street underwriters made $100 million from trading Facebook as retail investors lost $630 million and counting. Thus Wall Street wins even if investors lose because the game is rigged against the investors and in favor of Wall Street.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FLORIDA JUNK BOND INVESTORS--LOOK OUT!

Junk bonds have outperformed all major asset classes over the past three years. But junk bond funds are now under selling pressure. Investors have been removing money from junk bond funds at record levels recently. Levels of redemptions were at their fourth largest levels on record last week as net outflows from junk bond mutual funds and exchange traded funds amounted to $2.46 billion.

UBS reportedly said that outflows from junk bond exchange traded funds would have been even bigger were it not for short covering by traders who had bet against those ETFs. In addition, professional investors are bearish on junk bond funds. Concerns about Europe, in particular, are eroding the sentiment that drove a rally in junk bonds earlier in the year.

Individual investors looking for better yields who helped fuel the run-up are in danger if selling continues. If demand continues to erode, so will liquidity. If selling increases and liquidity dries up, fund managers will have to sell their best assets at fire sale prices to cover redemptions demands. Investors and their advisors would be well-advised to reconsider their allocation to high-yield investments.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WELLS FARGO, CITIGROUP, MORGAN STANLEY, UBS FINED FOR IMPROPER SALES OF HIGH-RISK ETFS NATIONWIDE

The Financial Industry Regulatory Authority (FINRA) announced that it ordered Wells Fargo Advisors, Citigroup Global Markets, Morgan Stanley, and UBS Financial Services to pay more than $9.1 million for failure to supervise and failure to have a reasonable basis for recommending selling leveraged and inverse exchange traded funds. Each of the four firms sold billions of dollars of these leveraged and inverse exchange traded funds.

The payments consist of more than $7.3 million in fines and $1.8 million in restitution to customers who purchased the leveraged and inverse exchange traded funds. The breakdown is as follows:

• Wells Fargo - $2.1 million fine and $641,489 in restitution
• Citigroup - $2 million fine and $146,431 in restitution
• Morgan Stanley - $1.75 million fine and $604,584 in restitution
• UBS - $1.5 million fine and $431,488 in restitution

Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, was quoted as saying: "The added complexity of leveraged and inverse exchange-traded products makes it essential that brokerage firms have an adequate understanding of the products and sufficiently train their sales force before the products are offered to retail customers. Firms must conduct reasonable due diligence and ensure that their representatives have an understanding of these products."

In addition, FINRA found that the firms' registered representatives made unsuitable recommendations of leveraged and inverse exchange-traded funds to some customers with conservative investment objectives and/or risk profiles, some of whom held them for extended periods during January 2008 through June 2009 when the markets were volatile.

Leveraged and inverse exchange-traded funds have risks not found in traditional exchange traded funds. Those risks flow from the daily reset, leverage and compounding of leveraged and inverse exchange traded funds, which caused them to differ significantly from the performance of the underlying index or benchmark when held for longer periods of time. That was particularly true in the volatile markets that existed during January 2008 through June 2009.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

SEC "WAIVERS" AND "FAVORS" FOR WALL STREET

U.S. District Court Judge Jed Rakoff threw light on the Securities and Exchange Commission's longstanding practice of allowing firms that it has accused of fraud to buy their peace without admitting wrongdoing. He refused to approve a settlement agreed to Citigroup and the SEC in which Citigroup consented to, but expressly neither admitted nor denied, the charges. Judge Rakoff found that to be against the public interest. Both the SEC and Citigroup appealed the decision to the court of appeals.

In another case, this time against UBS, which "reads like a 'how-to' primer for bid-rigging and securities fraud," according to the SEC's complaint, UBS requested, and the SEC readily agreed to, a waiver from a rule that would have prohibited it from participating in certain securities offerings. In its letter requesting the waiver, UBS pointed to nine instances where the SEC had granted similar waivers. These waivers are significant concessions given to big firms that the SEC has repeatedly charged with significant wrongdoing, including fraud. The repeated granting of waivers supports the widely held belief that the SEC is a captive of the industry it is supposed to regulate.

Susan Antilla's recent Bloomberg column summarizes the securities regulatory enforcement activity in 2011 as a series of breaks, favors and waivers doled out by the regulators to big Wall Street banks. To be sure, the regulators often lower the boom on the small players, but Wall Street is another matter. ("Wall Street's Big Swingers Get the Biggest Breaks: Antilla," Bloomberg).

The revolving door between the SEC and Wall Street also caught Ms. Antilla's attention. The presence of so many former SEC senior attorneys on Wall Street defense teams fosters a club-like atmosphere. It exists unseen under the cover of the SEC's public charges, and is thought to be largely responsible for the favors and waivers and "neither admit nor deny" settlements.

The Financial Industry Regulatory Authority (FINRA), an organization entirely funded by the securities industry, whose senior executives receive 7-figure compensation packages, has primary responsibility for regulating its member brokerage firms. As Ms. Antilla points out, it can be tough and tenacious with smaller firms, but a big swinger, like Jon Corzine, former CEO of defunct MF Global, got a waiver from a requirement that anyone who has been out of the securities business for over two years must take applicable licensing exams. Corzine took over MF Global in 2010 without taking any exams, after having been out of the business since 1999.

Fewer favors and more firmness from regulators - even to the point of digging in their heels to enforce rules - would be a good idea, according to Ms. Antilla.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WATCH OUT - UNITED STATES AND INTERNATIONAL ETF AND ETN INVESTORS!

The SEC and FINRA are finally stepping up to regulate nontraditional ETFs and ETNs and to ensure that these complicated products are not sold to unsophisticated investors.

Citigroup Global Markets Inc., Morgan Stanley, UBS Financial Services Inc. and Wells Fargo recently agreed to pay $9.1 million to settle allegations that they sold leveraged and inverse exchange-traded funds to clients who had no business investing in the complex instruments.

In its first actions against firms that put clients in these products, FINRA said the four wirehouses experienced supervisory failures and lacked a "reasonable basis" for recommending the securities to certain clients. Together, the firms bought and sold $27 billion of the nontraditional ETFs from January 2008 through June 2009, FINRA said.

The firms agreed to pay the fines of $7.3 million and restitution of $1.8 million without admitting or denying the allegations.

These sanctions are likely only the beginning as it is now clear that ETFs and ETNs are a significant problem for the brokerage industry.

In March 2010, the SEC stopped approving applications for ETFs that use derivatives and indicated that it wants to review whether additional investor protections are warranted, particularly for leveraged and inverse ETFs.

FINRA and the SEC's involvement in these products is a result of the leverage and risks associated with these investments and the concern that such investments can be confused with less risky and more traditional ETFs.

The more exotic ETFs are riskier because they reset daily and use leverage and compounding. Results of leveraged and inverse ETFs can differ significantly from the performance of the underlying index, especially when held for long periods of time and during volatile markets.

FINRA and the SEC published a joint investor alert in 2009 warning that leveraged and inverse ETFs are complicated investments that focus on meeting daily performance goals. The agencies said long-term performance is likely to be very different than the investment's stated daily objectives, and recommended that investors discuss the products with an investment professional.

The following is a list of some of the ETFs and ETNs currently available:

BGZ - Direxion Daily Large Cap Bear 3X Shares ETF
BIS - UltraShort NASDAQ Biotechnology ETF
BRIS - Direxion Daily BRIC Bear 3x Shares ETF
BXDB - Barclays Short B Leveraged Inverse S&P 500 Total Return ETN
COWS - Direxion Daily Agribusiness Bear 3x Shares ETF
DDG - Short Oil & Gas ProShares ETF
DGLD - 3x Inverse Gold ETN
DLBS - iPath US Treasury Long Bond Bear ETN
DMM - MacroShares Housing Down ETF
DNO - United States Short Oil ETF
DOG - Short Dow30 ProShares ETF
DOY - MacroShares $100 Oil Down ETF
DPK - Direxion Daily Devloped Markets Bear 3X Shares ETF
DSLV - 3x Inverse Silver ETN
DSTJ - JP Morgan 2X Short US Long Treasury Futures ETN
DSXJ - JP Morgan 2X Short US 10 Year Treasury Futures ETN
DUG - UltraShort Oil & Gas ProShares ETF
DUST - Direxion Daily Gold Miners Bear 3x Shares ETF
DXD - UltraShort Dow 30 ProShares ETF
EDZ - Direxion Daily Emerging Markets Bear 3X Shares ETF
EEV - UltraShort MSCI Emerging Markets ProShares ETF
EFU - UltraShort MSCI EAFE ProShares ETF
EFZ - Short MSCI EAFE ProShares ETF
ERY - Direxion Daily Energy Bear 3X Shares ETF
EUM - Short MSCI Emerging Markets ProShares ETF
EUO - ProShares UltraShort Euro ETF
EWV - UltraShort MSCI Japan ProShares ETF
FAZ - Direxion Daily Financial Bear 3X Shares ETF
FXP - UltraShort FTSE/Xinhua China25 Proshares ETF
GASX - Direxion Daily Natural Gas Related Bear 3X Shares ETF
GLL - UltraShort Gold ProShares ETF
INDZ - Direxion Daily India Bear 3x Shares ETF
IPAL - 2x Inverse Palladium ETN
IPLT - 2x Inverse Platinum ETN
KRS - Short KBW Regional Banking ETF
KOLD - UltraShort DJ-UBS Natural Gas ETF
LHB - Direxion Daily Latin America 3x Bear Shares ETF
MATS - Direxion Daily Basic Materials Bear 3X Shares ETF
MWN - Direxion Daily Mid Cap Bear 3X Shares ETF
MYY - Short MidCap400 ProShares ETF
MZZ - UltraShort MidCap400 ProShares ETF
PSQ - Short QQQ ProShares ETF
PST - ProShares UltraShort 7-10 Year Treasury ETF
QID - UltraShort QQQ ProShares ETF
QLD - Ultra QQQ ProShares ETF
REK - ProShares Short Real Estate ETF
RETS - Direxion Daily Retail Bear 3X Shares ETF
REW - UltraShort Technology ProShares ETF
RINF - ProShares 30 Year TIPS/TSY Spread ETF
RSW - Rydex Inverse 2x S&P 500 ETF
RUSS - Direxion Daily Russia Bear 3x Shares ETF
RWM - Short Russell2000 ProShares ETF
RXD - UltraShort Health Care ProShares ETF
SAGG - Daily Total Bond Market Bear 1x Shares ETF
SBB - ProShares Short S&P SmallCap600 ETF
SBM - ProShares Short Basic Materials ETF
SCC - ProShares UltraShort Consumer Services ETF
SCO - ProShares UltraShort DJ-AIG Crude Oil ETF
SDD - ProShares UltraShort SmallCap600 ETF
SDK - ProShares UltraShort MidCap Growth ETF
SDOW - UltraPro Short Dow 30 ETF
SDP - ProShares UltraShort Utilities ETF
SDS - ProShares UltraShort S&P500 ETF
SEF - Short Financials ProShares ETF
SFK - ProShares UltraShort Russell1000 Growth ETF
SH - ProShares Short S&P500 ETF
SICK - Direxion Daily Healthcare Bear 3X Shares ETF
SIJ - ProShares UltraShort Industrials ETF
SJB - ProShares Short High Yield ETF
SJH - UltraShort Russell2000 Value ProShares ETF
SJL - ProShares UltraShort MidCap Value ETF
SFK - UltraShort Russell1000 Growth ProShares ETF
SKK - UltraShort Russell 2000 Growth ProShares ETF
SMDD - UltraPro Short Mid-Cap 400 ETF
SMN - ProShares UltraShort Basic Materials ETF
SOXS - Direxion Daily Semiconductor Bear 3x Shares ETF
SPXU - ProShares Ultra Pro Short S&P 500 ETF
SQQQ - UltraPro Short QQQ ETF
SRS - ProShares UltraShort Real Estate ETF
SRTY - UltraPro Short Russell 2000 ETF
SSG - ProShares UltraShort SemiConductor ETF
SVXY - ProShares Short VIX Short-Term Futures ETF
SZK - ProShares UltraShort Consumer Goods ETF
TBF - ProShares Short 20+ Year Treasury ETF
TBT - ProShares UltraShort 20+ Year Treasury ETF
TBX - Short 7-10 Year Treasury ETF
TBZ - UltraShort 3-7 Year Treasury ETF
TLL - ProShares UltraShort Telecommunications ETF
TMV - Direxion Daily 30-year Treasury Bear 3x Shares ETF
TOTS - Direxion Daily Total Market Bear 1X Shares ETF
TPS - ProShares UltraShort TIPS ETF
TTT - UltraPro Short 20+ Year Treasury ETF
TWM - UltraShort Russell 2000 ProShares ETF
TYBS - Daily 20 Year Plus Treasury Bear 1x Shares ETF
TYNS - Daily 7-10 Year Treasury Bear 1x Shares ETF
TYO - Direxion Daily 10-year Treasury Bear 3x Shares ETF
TYP - Direxion Daily Technology Bear 3x Shares ETF
TZA - Direxion Daily SmallCap Bear 3x Shares ETF
TWQ - ProShares UltraShort Russell 3000 Index ETF
UDN - PowerShares US Dollar Bearish ETF
YCS - ProShares UltraShort Yen ETF
YXI - Proshares Short FTSE / Xinhua China 25 ETF
ZSL - ProShares UltraShort Silver ETF
AGA - PowerShares DB Agriculture Double Short ETN
BOM - PowerShares DB Base Metals Double Short ETN
DDP - PowerShares DB Commodity Short ETN
DEE - PowerShares DB Commodity Double Short ETN
DGZ - PowerShares DB Gold Short ETN
DRR - Market Vectors Double Short Euro ETN
DTO - PowerShares DB Crude Oil Double Short ETN
DTUS - iPath US Treasury 2-year Bear ETN
DTYS - iPath US Treasury 10-year Bear ETN
DZZ - PowerShares DB Gold Double Short ETN
EMSA - iPath Short Enhanced MSCI Emerging Markets Index ETN
IVOP - iPath Inverse S&P 500 VIX Short-Term Futures ETN
JGBS - PowerShares DB Inverse Japanese Government Bond Futures ETN
JGBD - PowerShares DB 3x Inverse Japanese Government Bond Futures ETN
MFSA - iPath Short Enhanced MSCI EAFE Index ETN
MLPS - UBS E-TRACS 1x Monthly Short Alerian MLP Infrastructure Total Return Index ETN
ROSA - iPath Short Extended Russell 1000 TR Index ETN
RTSA - iPath Short Extended Russell 2000 TR Index ETN
SBND - PowerShares DB 3X Short 25+ Year Treasury Bond Exchange Traded Note ETN
SFSA - iPath Short Extended S&P 500 TR Index ETN
SZO - PowerShares DB Crude Oil Short ETN
UDNT - PowerShares DB 3x Short US Dollar Index Futures ETN
XXV - Barclays ETN+ Inverse S&P 500 VIX Short-Term Futures ETN
XIV - VelocityShares Daily Inverse VIX Short Term ETN
ZIV - VelocityShares Daily Inverse VIX Mid Term ETN

Each of these investments are examples of some of the high-risk inverse ETFs and ETNs which are not suitable for unsophisticated, long-term investors.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

SEC INVESTIGATES INLAND AMERICAN REAL ESTATE TRUST

Inland American Real Estate Trust Inc. is being investigated by the Securities and Exchange Commission according to that firm's quarterly report. The SEC's investigation is reportedly focusing on fees. Inland American is the industry's largest non-traded real estate investment trust, and has $11.2 billion in real estate assets. Inland American is one of five REITs sponsored by The Inland American Real Estate Group of Companies Inc.

REITs typically pay a high commission-often as much as 15% (which often explains the stockbroker's motivation in recommending the REIT investment to the investor). Due to the relatively high interest or dividend offered by non-traded REITs, elderly and retirees are often victimized by those misrepresented and unsuitable investment recommendations.

In addition to issues over fees, non-traded REITs have been cited for valuation problems. Over the past year, a number of non-traded REITs have been forced by regulators to stop valuing their REITs at the purchase price (which was false and misleading to investors) and disclose to investors an estimated true value. This has resulted in a wave of sharp decreases from previously reported values that have shocked investors. A related REIT, Retail Properties of America Inc., formerly known as Inland Western Retail Real Estate Trust Inc., recently had an initial public offering at $3.20 per share when just last June, that REIT's management said its estimated value was $6.95 per share.

InvestmentNews recently reported that the following non-traded REITs had suffered steep losses, as follows:

Behringer Harvard Short-Term Opportunity Fund - down 96%
Cornerstone Core Properties REIT - down 71.88%
Behringer Harvard Opportunity REIT I - down 58.80 %
Behringer Harvard REIT I - down 53.60%

KBS Real Estate Investment Trust Inc. - down 48.40%

Inland Western Retail Real Estate Trust Inc. - down 30.50%.

The Financial Industry Regulatory Authority (FINRA) is also investigating the non-traded REIT industry, and has commenced enforcement actions against some broker-dealer managers like Pacific Cornerstone Capital.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

ELDER FINANCIAL ABUSE EPIDEMIC NOT ONLY IN FLORIDA BUT NATIONWIDE

Elder financial abuse is an "epidemic" and likely to become much worse given that 77 million baby boomers are entering their so-called "retirement" years (See "Golden years? Financial elder-abuse now epidemic," Andrew Osterland, InvestmentNews). Between 500,000 and 5 million elders are abused, neglected or exploited each year, and the abuse is often unreported. "Elders can be afraid to report abuse, for a variety of reasons," one practitioner was quoted as saying, adding: "In many cases, they may depend on the abuser and fear reprisals from them. They may be afraid of being placed in a nursing home or dread the stigma of domestic violence."

Fifty eight percent of elder abuse involves financial exploitation. Financial abuse is often accompanied by emotional abuse. In many cases, the abuser is a family member who has been appointed as attorney-in-fact or guardian for the elder, or one who is offended at not being so appointed.

The abuser is a spouse, child or relative in 78% of elder-abuse cases according to 2010 statistics from the Illinois Department on Aging. In one infamous example, actor Mickey Rooney reportedly said he had food and water withheld from him by his stepson, who allegedly stole over $400,000 from him.
Professionals often have occasion to suspect that a client, friend or family member is being abused or is losing the capacity to make financial decisions. If diminished mental capacity or abuse is suspected, the professional should express those concerns to family and friends of the victim and, where appropriate, to legal counsel.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

FINRA FINES CITIGROUP OVER MORTGAGE REPORTS

The Financial Industry Regulatory Authority (FINRA) recently announced that it has fined Citigroup Global Markets, Inc. $3.5 million for providing inaccurate mortgage performance information, supervisory failures and other violations in connection with subprime residential mortgage-backed securitizations.

Issuers of subprime residential mortgage-backed securitizations are required to disclose historical performance information for past securitizations that contain mortgage loans similar to those in the subprime residential mortgage-backed securitizations being offered to investors. Historical data on mortgage performance is material to investors in assessing the value of subprime residential mortgage-backed securitizations and in determining whether future returns may be disrupted by mortgage holders' failures to make loan payments.

FINRA found that from January 2006 to October 2007, Citigroup posted inaccurate mortgage performance data on its website, where it remained until early May 2012, even though the firm lacked a reasonable basis to believe that this data was accurate. On multiple occasions, Citigroup was informed that the information posted was inaccurate yet failed to correct the data until May 2012. For three subprime or Alt-A securitizations, the firm provided inaccurate mortgage performance data that may have affected investors' assessment of subsequent subprime residential mortgage-backed securitizations.

In addition, Citigroup failed to supervise mortgage-backed securities pricing because it lacked procedures to verify the pricing of these securities and did not sufficiently document the steps taken to assess the reasonableness of traders' prices. Also, Citigroup failed to maintain required books and records. In certain instances, when it re-priced mortgage-backed securities following a margin call, Citigroup failed to maintain a record of the original margin call, document the supervisory approval or demonstrate that the revised price was applied to the same position throughout the firm.

In settling this matter, Citigroup neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights nationwide! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.