Randy Jason Schneider, a former broker at New York, New York based Oppenheimer & Co. Inc., has been sanctioned based on the Financial Industry Regulatory Authority's (FINRA) findings that Mr. Schneider received checks totaling approximately $39,000 from an elderly customer to deposit into the customer's brokerage account for later purchases of bonds, but instead he either cashed or deposited the checks into his own bank account for his personal benefit and never disclosed the misappropriation to the customer. The customer never authorized Mr. Schneider to use the funds for his personal use. The findings stated that Mr. Schneider also deposited the customer's bearer bonds into his own brokerage account, sold the bonds and used the proceeds, totaling $223,000, for his personal use without disclosing the sale to the customer and without the customer's authorization to sell the bonds and take the proceeds for his personal use. The findings also stated that the customer's brother, another customer of Mr. Schneider's, delivered bearer bonds totaling approximately $20,000 to Mr. Schneider for deposit into his brokerage account, and Mr. Schneider provided him with a receipt evidencing acceptance of the bonds. However, Mr. Schneider sold the bonds and took the proceeds for his own use without authorization. The findings further included that Mr. Schneider wired portions of the funds and bond proceeds between his brokerage and personal bank accounts, which made it more difficult to trace them back to his customers.
Mr. Schneider failed to respond to FINRA requests for information, documents, and to appear for on-the-record testimony. Mr. Schneider, of West Orange, New Jersey, was barred from association with any FINRA member in any capacity and ordered to pay $282,000 plus interest in restitution to customers. Mr. Schneider appealed the OHO decision to the NAC, but the appeal was dismissed as abandoned.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from broker misconduct. If broker-dealers do not establish and implement a reasonable supervisory system, they may be liable to investors for damages flowing from the misconduct. Therefore, investors who have suffered damages due to misappropriations such as those by Mr. Schneider can bring forth claims to recover losses against broker-dealers like Oppenheimer & Co. Have you suffered losses in your Oppenheimer & Co. Inc. account due to a misappropriation by your broker? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Oppenheimer & Co. Inc. stockbrokers who may have engaged in misconduct and caused investors losses.
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.
Showing posts with label FINRA News. Show all posts
Showing posts with label FINRA News. Show all posts
Saturday, December 21, 2013
Tuesday, December 17, 2013
MAN INVESTMENTS INC. FINED AND SUSPENDED BY FINRA FOR DISTRIBUTING MARKETING MATERIALS THAT OMITTED MATERIAL INFORMATION
New York, New York based Man Investments Inc. submitted a Letter of Acceptance, Waiver, and Consent in which the firm was censured, fined $125,000, and consented to the described sanctions and to the entry of the Financial Industry Regulatory Authority's findings that it distributed marketing materials that omitted material information, failed to provide a balanced presentation or failed to provide a sound basis for evaluating certain information presented. The marketing materials consisted of quarterly fund updates, annual summaries and printed slide presentations that were prepared by the funds and/or the firm. The findings stated that presentations, used as marketing materials, used selective, positive examples of how activism and event-driven/special situations raise stock prices but omitted negative counter-examples thereby failing to provide a balanced presentation.
FINRA's findings also stated that an investment product brochure, promoting a structured product hedge fund, contained certain risk disclosures but failed to specifically disclose that the fund was speculative and involved a substantial degree of risk. While the brochure contained certain fee information, it failed to specifically disclose that significant fees and expenses would be imposed by the fund and the fact that such fees may offset any profits. The brochure also failed to disclose in close proximity to the discussion of the fund's performance certain material information regarding the fund's performance. The brochure's explanation of the fund's use of leverage and its principal protection feature was incomplete, unbalanced and failed to provide a sound basis for evaluating the merits of investing in the fund. The communication illustrated only potential benefits of the fund's use of leverage while failing to adequately address the risks and additional costs associated with the strategy. In addition, the brochure contained misleading and unwarranted descriptions of the fund's investment objectives by failing to provide a basis for statements regarding the annualized volatility of the fund and by including performance information for a non-U.S. version of the fund, while not clearly identifying the data as related performance.
Moreover, the communication emphasized the investment upside potential of the fund's principal protection feature and included only general statements regarding the negative aspects of a principal protection feature. FINRA found that the firm also distributed communications that contained exaggerated claims. In one instance, a communication made a prohibited performance projection, which implied that past performance will reoccur. The marketing materials have since been amended or are no longer being used by the firm.
FINRA prohibits false, misleading, or exaggerated communications with the public and the omission of material facts or qualifications that would cause a communication to be misleading. All communications must comply with principles of fair dealing and good faith. Therefore, investors who have suffered damages due to their reliance on insufficient and/or misleading marketing materials can bring forth claims to recover losses against broker-dealers like Man Investments, which should have adequately informed its investors of the risks and performance of the subject funds.
Have you suffered losses in your Man Investments account due to misrepresented funds and/or other investments? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Man Investments stockbrokers who may have engaged in misconduct and caused investors losses.
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's findings also stated that an investment product brochure, promoting a structured product hedge fund, contained certain risk disclosures but failed to specifically disclose that the fund was speculative and involved a substantial degree of risk. While the brochure contained certain fee information, it failed to specifically disclose that significant fees and expenses would be imposed by the fund and the fact that such fees may offset any profits. The brochure also failed to disclose in close proximity to the discussion of the fund's performance certain material information regarding the fund's performance. The brochure's explanation of the fund's use of leverage and its principal protection feature was incomplete, unbalanced and failed to provide a sound basis for evaluating the merits of investing in the fund. The communication illustrated only potential benefits of the fund's use of leverage while failing to adequately address the risks and additional costs associated with the strategy. In addition, the brochure contained misleading and unwarranted descriptions of the fund's investment objectives by failing to provide a basis for statements regarding the annualized volatility of the fund and by including performance information for a non-U.S. version of the fund, while not clearly identifying the data as related performance.
Moreover, the communication emphasized the investment upside potential of the fund's principal protection feature and included only general statements regarding the negative aspects of a principal protection feature. FINRA found that the firm also distributed communications that contained exaggerated claims. In one instance, a communication made a prohibited performance projection, which implied that past performance will reoccur. The marketing materials have since been amended or are no longer being used by the firm.
FINRA prohibits false, misleading, or exaggerated communications with the public and the omission of material facts or qualifications that would cause a communication to be misleading. All communications must comply with principles of fair dealing and good faith. Therefore, investors who have suffered damages due to their reliance on insufficient and/or misleading marketing materials can bring forth claims to recover losses against broker-dealers like Man Investments, which should have adequately informed its investors of the risks and performance of the subject funds.
Have you suffered losses in your Man Investments account due to misrepresented funds and/or other investments? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against Man Investments stockbrokers who may have engaged in misconduct and caused investors losses.
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.
Wednesday, December 11, 2013
HKC SECURITIES, INC. N.K.A. ACGM, INC. AND HAROLD KENNETH COHEN FINED AND SUSPENDED BY FINRA FOR VIOLATING INDUSTRY RULES
New York, New York based HKC Securities, Inc., now known as ACGM, Inc., and Harold Kenneth Cohen, of Palm Beach, Florida, submitted a Letter of Acceptance, Waiver and Consent in which the firm and Mr. Cohen consented to the described sanctions and to the entry of the Financial Industry Regulatory Authority's (FINRA) findings that the firm's hedge fund sales material failed to fairly present the risks and potential disadvantages of hedge fund investing, highlighting only the fund's positive features and not providing a sound basis for evaluating the investment, included exaggerated language, failed to identify the basis for factual statements made, and contained an inadequate discussion of the performance of the funds.
FINRA's findings stated that while the firm was engaged in marketing hedge funds, the firm's written supervisory procedures (WSPs) provided insufficient guidance with respect to FINRA's content standards for hedge fund advertising and did not discuss required risk disclosures specific to hedge fund investing. Mr. Cohen, as the firm's chief compliance officer (CCO), was responsible for the establishment of such procedures. The findings also stated that the firm failed to adequately supervise its registered representatives' use of institutional sales material. Mr. Cohen was the supervisor responsible for reviewing and approving communications with the public but did not follow the firm's written procedures, which required post-hoc review of institutional sales material and a written notation of approval. Mr. Cohen's review was limited, in that his review was not focused on compliance with FINRA's content standards, such as whether the documents contained exaggerated statements, had sufficient risk disclosures, or identified the factual basis for the statements made. Mr. Cohen's review was also limited to the summary document the firm prepared, and did not extend to the materials the firm sent that the funds themselves had prepared.
FINRA's findings also included that the firm did not maintain a complete file of institutional sales material used and did not notate the sales material with the name of the person who prepared the document and the date that the document was first circulated. Mr. Cohen was responsible for ensuring the firm's compliance with these recordkeeping requirements. The firm was censured and fined $50,000, and Cohen was censured and fined $10,000.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from broker misconduct. If broker-dealers do not establish and implement a reasonable supervisory system, they may be liable to investors for damages flowing from the misconduct. Therefore, investors who have suffered damages due to their reliance on insufficient and/or misleading sales materials can bring forth claims to recover losses against broker-dealers like HKC Securities, Inc. or ACGM, Inc., which should have adequately informed its investors of the risks and performance of the subject hedge funds.
Have you suffered losses in your HKC Securities, Inc. or ACGM, Inc. account due to misrepresented hedge funds? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against HKC Securities, Inc. or ACGM, Inc. stockbrokers who may have engaged in misconduct and caused investors losses.
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's findings stated that while the firm was engaged in marketing hedge funds, the firm's written supervisory procedures (WSPs) provided insufficient guidance with respect to FINRA's content standards for hedge fund advertising and did not discuss required risk disclosures specific to hedge fund investing. Mr. Cohen, as the firm's chief compliance officer (CCO), was responsible for the establishment of such procedures. The findings also stated that the firm failed to adequately supervise its registered representatives' use of institutional sales material. Mr. Cohen was the supervisor responsible for reviewing and approving communications with the public but did not follow the firm's written procedures, which required post-hoc review of institutional sales material and a written notation of approval. Mr. Cohen's review was limited, in that his review was not focused on compliance with FINRA's content standards, such as whether the documents contained exaggerated statements, had sufficient risk disclosures, or identified the factual basis for the statements made. Mr. Cohen's review was also limited to the summary document the firm prepared, and did not extend to the materials the firm sent that the funds themselves had prepared.
FINRA's findings also included that the firm did not maintain a complete file of institutional sales material used and did not notate the sales material with the name of the person who prepared the document and the date that the document was first circulated. Mr. Cohen was responsible for ensuring the firm's compliance with these recordkeeping requirements. The firm was censured and fined $50,000, and Cohen was censured and fined $10,000.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from broker misconduct. If broker-dealers do not establish and implement a reasonable supervisory system, they may be liable to investors for damages flowing from the misconduct. Therefore, investors who have suffered damages due to their reliance on insufficient and/or misleading sales materials can bring forth claims to recover losses against broker-dealers like HKC Securities, Inc. or ACGM, Inc., which should have adequately informed its investors of the risks and performance of the subject hedge funds.
Have you suffered losses in your HKC Securities, Inc. or ACGM, Inc. account due to misrepresented hedge funds? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is accepting clients with valid claims against HKC Securities, Inc. or ACGM, Inc. stockbrokers who may have engaged in misconduct and caused investors losses.
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.
Tuesday, February 26, 2013
MERRILL LYNCH SALIVATING OVER POTENTIAL COMMISSIONS FROM NON-TRADED REIT SALES
Bank of America Merrill Lynch has recently decided to offer non-traded real estate investment trusts (REITs) to its clients, making it the first major wirehouse to offer the alternative investment. Non-traded REITs have traditionally been sold by independent broker-dealers who focus on retail clients, but Merrill Lynch believes the moment is ripe to offer REITs to clients given that "the primary investment objectives are designed to provide attractive current income, preserve and protect invested capital, achieve net asset value appreciation over time and enable stockholders to utilize real estate as a long-term portfolio diversifier," said Merrill Lynch's Keith Glenfield. In fact, the company has already raised $50 million from clients interested in the Jones Lang LaSalle Income Property Trust REIT. However, since the onset of the financial crisis, non-traded REITs have proven themselves to be nothing more than risky and highly illiquid investments that have been the subject of regulatory scrutiny due to misrepresentations about the product. This lends itself to the notion that the only thing that remains certain about the REITs are the high commissions brokers will earn for selling them.
REITs invest in a diversified set of income producing real estate properties and mortgages, and they must distribute 90 percent of net earnings to investors. REITs allow investors to partake in real estate investing without directly owning property, which may lock up large amounts of money for long periods of time. The most popular REITs are publicly traded on a stock exchange such as the New York Stock Exchange (NYSE) - they are relatively transparent in their finances and operations and are covered extensively by investment analysts. Non-traded REITs are not listed or registered with securities regulators and are supposed to be available only to accredited investors - $1 million or more in assets or $200,000.00 in annual income. Non-traded REITs disclose their finances publicly and offer shares to the public, but they do not list their shares on an exchange, which is one of many risk factors associated with them.
There is no doubt that the potential to earn hefty commissions can influence broker-dealers such as Merrill Lynch to ignore duties owed to their clients. Such duties include performing adequate due diligence to better understand a product and evaluating whether the product is suitable for an individual's investment objectives and risk tolerance. As a result, the Financial Industry Regulatory Authority (FINRA) has issued several "Investor Alerts" regarding investing in non-traded REITs. The Alerts were intended to help investors understand the risks, benefits, features and fees associate with investing in non-traded REITs. The Alerts also warned investors about the use of borrowed funds, limited early redemption schemes and fees associated with the sale of the investments. Unfortunately, these Investor Alerts came too late for some investors who purchased non-traded REIT shares that have lost a significant amount of money.
The primary cause of the increased number of telephone calls to our office over the last five years is many elderly and retired investors have been steered into non-traded REITs as yields on other income producing investments have steadily declined. According to many investors, the REITS were recommended as safe, secure, and steady income producing investments which sounded to be exactly what many seniors wanted and needed. When any Wells REIT investor calls our office, we will make a customer specific suitability determination after we learn the "essential facts" concerning that investor. We will ask, just as their stockbroker should have asked, about their age, investment experience, time horizon liquidity needs (length of time they could hold the investment without need for the principal), risk tolerance, other holdings, and financial situation in terms of liquid total net worth, tax status and investment objectives. All of these factors are relevant to suitability determination, and most weigh against the ownership of REIT investments by elderly retired investors. If we believe a brokerage firm or its representatives made an unsuitable recommendation that any person invest in a non-traded REIT, we recommend that they file a FINRA arbitration claim and attempt to recover their losses!
Have you suffered losses resulting from a real estate investment trust sold by Merrill Lynch? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is actively investigating and accepting clients with valid claims against stockbrokers who misrepresented and sold real estate investment trusts to 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, 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.
REITs invest in a diversified set of income producing real estate properties and mortgages, and they must distribute 90 percent of net earnings to investors. REITs allow investors to partake in real estate investing without directly owning property, which may lock up large amounts of money for long periods of time. The most popular REITs are publicly traded on a stock exchange such as the New York Stock Exchange (NYSE) - they are relatively transparent in their finances and operations and are covered extensively by investment analysts. Non-traded REITs are not listed or registered with securities regulators and are supposed to be available only to accredited investors - $1 million or more in assets or $200,000.00 in annual income. Non-traded REITs disclose their finances publicly and offer shares to the public, but they do not list their shares on an exchange, which is one of many risk factors associated with them.
There is no doubt that the potential to earn hefty commissions can influence broker-dealers such as Merrill Lynch to ignore duties owed to their clients. Such duties include performing adequate due diligence to better understand a product and evaluating whether the product is suitable for an individual's investment objectives and risk tolerance. As a result, the Financial Industry Regulatory Authority (FINRA) has issued several "Investor Alerts" regarding investing in non-traded REITs. The Alerts were intended to help investors understand the risks, benefits, features and fees associate with investing in non-traded REITs. The Alerts also warned investors about the use of borrowed funds, limited early redemption schemes and fees associated with the sale of the investments. Unfortunately, these Investor Alerts came too late for some investors who purchased non-traded REIT shares that have lost a significant amount of money.
The primary cause of the increased number of telephone calls to our office over the last five years is many elderly and retired investors have been steered into non-traded REITs as yields on other income producing investments have steadily declined. According to many investors, the REITS were recommended as safe, secure, and steady income producing investments which sounded to be exactly what many seniors wanted and needed. When any Wells REIT investor calls our office, we will make a customer specific suitability determination after we learn the "essential facts" concerning that investor. We will ask, just as their stockbroker should have asked, about their age, investment experience, time horizon liquidity needs (length of time they could hold the investment without need for the principal), risk tolerance, other holdings, and financial situation in terms of liquid total net worth, tax status and investment objectives. All of these factors are relevant to suitability determination, and most weigh against the ownership of REIT investments by elderly retired investors. If we believe a brokerage firm or its representatives made an unsuitable recommendation that any person invest in a non-traded REIT, we recommend that they file a FINRA arbitration claim and attempt to recover their losses!
Have you suffered losses resulting from a real estate investment trust sold by Merrill Lynch? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation. Mr. Pearce is actively investigating and accepting clients with valid claims against stockbrokers who misrepresented and sold real estate investment trusts to 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, 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.
Saturday, January 19, 2013
FINRA INVESTIGATES BROKER-DEALERS FOR SELLING VARIABLE ANNUITIES INVESTED IN HEDGE FUNDS
The Financial Industry Regulatory Authority (FINRA) is investigating six independent broker-dealers for selling variable annuities with subaccounts invested in hedge funds, which resulted in $18 million in client losses during the credit crisis. The variable annuity product at the heart of the investigation was issued by Sun Life Financial, and the two hedge funds were Foresee Strategies Insurance Fund and the Foresee Strategies 3(c)(1) Insurance Fund LP, which were related to a group called the SALI Multi-Series Fund LP. The broker-dealers that have already faced FINRA arbitration complaints from investors include: Geneos Wealth Management Inc., Lincoln Financial Network, National Planning Corp., SagePoint Financial Inc., and FSC Securities Corp. Lincoln Financial had the most clients in the Sun Life annuity, and the average investment was about $500,000.00. One broker-dealer that sold the product has completely shut down, and Sun Life has dropped out of the variable annuity business altogether.
An annuity is a form of insurance that offers a series of payments for a period of time. Variable annuities are typically higher in risk when compared with other types of annuities and depend on how the stock market is performing. Buyers have the option to allocate the cash invested into different types of assets such as mutual funds, indices, fixed income investments or bonds, and cash. Variable annuities do not guarantee principal protection, so investors can lose money if markets deteriorate.
Hedge funds are similar to mutual funds in structure. Investor money is pooled together and invested in an effort to make a positive return. However, hedge funds have more flexible investment strategies than mutual funds. Hedge funds seek to profit in all kinds of markets by utilizing strategies involving leverage, short-selling, and other speculative investment practices that are not typically used by mutual funds. Another factor that distinguishes hedge funds from mutual funds is that hedge funds are not subject to the same regulations designed to protect investors. Depending on the amount of assets in the hedge funds advised by a manager, some hedge funds may not be required to file reports with the SEC. Fortunately, hedge funds are subject to the same prohibitions against fraud as are other market participants. In addition, managers owe a fiduciary duty to the funds under management.
The funds' strategy was put together between 2004 and 2007, which was considered a period of low volatility - the strategy was to invest in options in the Standard and Poor's 500 Stock Index, and to use both put and call options, known as a strangle. The strategy collapsed when the market crash began in September 2008, which caused one fund to lose 90 percent of its value, and the other to lose 75 percent. A FINRA arbitration panel has recently issued a $284,000.00 award to a SagePoint client, who alleged unsuitability, common law fraud, breach of fiduciary duty, and negligence. Three of the other broker-dealers have already resolved litigation.
Have you suffered losses in your variable annuity due to investments in hedge funds? 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.
An annuity is a form of insurance that offers a series of payments for a period of time. Variable annuities are typically higher in risk when compared with other types of annuities and depend on how the stock market is performing. Buyers have the option to allocate the cash invested into different types of assets such as mutual funds, indices, fixed income investments or bonds, and cash. Variable annuities do not guarantee principal protection, so investors can lose money if markets deteriorate.
Hedge funds are similar to mutual funds in structure. Investor money is pooled together and invested in an effort to make a positive return. However, hedge funds have more flexible investment strategies than mutual funds. Hedge funds seek to profit in all kinds of markets by utilizing strategies involving leverage, short-selling, and other speculative investment practices that are not typically used by mutual funds. Another factor that distinguishes hedge funds from mutual funds is that hedge funds are not subject to the same regulations designed to protect investors. Depending on the amount of assets in the hedge funds advised by a manager, some hedge funds may not be required to file reports with the SEC. Fortunately, hedge funds are subject to the same prohibitions against fraud as are other market participants. In addition, managers owe a fiduciary duty to the funds under management.
The funds' strategy was put together between 2004 and 2007, which was considered a period of low volatility - the strategy was to invest in options in the Standard and Poor's 500 Stock Index, and to use both put and call options, known as a strangle. The strategy collapsed when the market crash began in September 2008, which caused one fund to lose 90 percent of its value, and the other to lose 75 percent. A FINRA arbitration panel has recently issued a $284,000.00 award to a SagePoint client, who alleged unsuitability, common law fraud, breach of fiduciary duty, and negligence. Three of the other broker-dealers have already resolved litigation.
Have you suffered losses in your variable annuity due to investments in hedge funds? 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.
Friday, January 18, 2013
INVESTORS NATIONWIDE BEWARE - THERE IS NO "MARGIN" FOR ERROR IN INVESTING WITH BORROWED FUNDS!
The Financial Industry Regulatory Authority (FINRA) is concerned about the slew of investors that underestimate the risks of trading on margin and misunderstand the reason for margin calls. In 2012 alone, investors purchasing on margin has averaged more than $320 billion per month. The problem lies in not being able to satisfy margin calls under unfavorable market conditions - investors can have large portions of their portfolios liquidated, and these liquidations can cause substantial losses for investors. Therefore, before an investor decides to open a margin account, he or she should understand all the risks associated with purchasing securities on margin.
Margin accounts allow investors to borrow money from their brokerage firm to purchase securities. The portion of the purchase price that the investor must deposit is called margin, and it is the investor's initial equity in the account. The loan from the firm is secured by the securities the investor purchases. If the securities on margin go down in price, the firm can issue a margin call, which is a demand that the investor repay all or part of the loan with cash, make a deposit of securities, or liquidate some of the securities in the account. Therefore, buying on margin amounts to getting a loan from the brokerage firm, which entails repaying the amount borrowed plus interest - even if you lose money. Some firms automatically open margin accounts with the account owner knowing.
The Federal Reserve Board, FINRA, and securities exchanges, including the New York Stock Exchange (NYSE), regulate margin trading, and most brokerage firms also establish their own stringent margin requirements. Before purchasing a security on margin, FINRA requires that the investor deposit the lesser of $2000 or 100 percent of the purchase price in the account - called minimum margin. Federal Reserve rules allow investors to borrow up to 50% of the total purchase price of a stock for new, or initial, purchases - called initial margin. If the investor does not already have cash or other securities in the account to cover the share of the purchase price, the investor will received a margin or Fed call from his or her firm that requires the investor to deposit the other 50 percent of the purchase price. Under FINRA's margin maintenance requirements rule, the equity in the account must not fall below 25 percent of the current market value of the securities in the account. If it does, the investor will receive a margin maintenance call that requires the investor to deposit more funds or securities in order to maintain the equity at the 2 percent level in order to avoid the risk of a forced sale of securities by the firm. Also, firms have the right to set their own margin requirements - called house requirements. As long as requirements are set higher than the margin requirements under Regulation T or the FINRA rules and the exchanges, firms are permitted to do so.
Investors should consider the number of risks associated with opening and trading in a margin account. The following points should be kept in mind while making a decision:
-The firm can force the sale of securities in your account to meet a margin call. Investors are responsible for the margin deficiency and shorts falls in the account after the sale should the accounts fall below the maintenance margin requirements under the law or set by the firm.
-Your firm can sell your securities without contacting you. Many investors believe that a firm must contact them first for a margin call to be valid. Although most firms will attempt to contact the account holder, they are not required to do so. Firms can even initiate a sale after a deadline is provided to the account holder.
-You are not entitled to choose which securities or other assets in your account are sold. The firm may decide to sell any of the securities that are collateral for your margin loan to protect its interests.
-Your firm can increase its house maintenance requirements at any time and is not required to provide you with advance notice. If an unexpected house call is made, the firm can liquidate any holdings they choose.
-You are not entitled to an extension of time on a margin call. Although an extension of time may be available under certain conditions, there is not right to an extension.
-You can lose more money than you deposit in a margin account. A decline in value of the securities purchased on margin may require the investor to provide additional money to the firm to avoid forced sale of those securities or other securities held in the account.
Have you suffered losses resulting from your broker's recommendation to open and trade in a margin account? 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.
Margin accounts allow investors to borrow money from their brokerage firm to purchase securities. The portion of the purchase price that the investor must deposit is called margin, and it is the investor's initial equity in the account. The loan from the firm is secured by the securities the investor purchases. If the securities on margin go down in price, the firm can issue a margin call, which is a demand that the investor repay all or part of the loan with cash, make a deposit of securities, or liquidate some of the securities in the account. Therefore, buying on margin amounts to getting a loan from the brokerage firm, which entails repaying the amount borrowed plus interest - even if you lose money. Some firms automatically open margin accounts with the account owner knowing.
The Federal Reserve Board, FINRA, and securities exchanges, including the New York Stock Exchange (NYSE), regulate margin trading, and most brokerage firms also establish their own stringent margin requirements. Before purchasing a security on margin, FINRA requires that the investor deposit the lesser of $2000 or 100 percent of the purchase price in the account - called minimum margin. Federal Reserve rules allow investors to borrow up to 50% of the total purchase price of a stock for new, or initial, purchases - called initial margin. If the investor does not already have cash or other securities in the account to cover the share of the purchase price, the investor will received a margin or Fed call from his or her firm that requires the investor to deposit the other 50 percent of the purchase price. Under FINRA's margin maintenance requirements rule, the equity in the account must not fall below 25 percent of the current market value of the securities in the account. If it does, the investor will receive a margin maintenance call that requires the investor to deposit more funds or securities in order to maintain the equity at the 2 percent level in order to avoid the risk of a forced sale of securities by the firm. Also, firms have the right to set their own margin requirements - called house requirements. As long as requirements are set higher than the margin requirements under Regulation T or the FINRA rules and the exchanges, firms are permitted to do so.
Investors should consider the number of risks associated with opening and trading in a margin account. The following points should be kept in mind while making a decision:
-The firm can force the sale of securities in your account to meet a margin call. Investors are responsible for the margin deficiency and shorts falls in the account after the sale should the accounts fall below the maintenance margin requirements under the law or set by the firm.
-Your firm can sell your securities without contacting you. Many investors believe that a firm must contact them first for a margin call to be valid. Although most firms will attempt to contact the account holder, they are not required to do so. Firms can even initiate a sale after a deadline is provided to the account holder.
-You are not entitled to choose which securities or other assets in your account are sold. The firm may decide to sell any of the securities that are collateral for your margin loan to protect its interests.
-Your firm can increase its house maintenance requirements at any time and is not required to provide you with advance notice. If an unexpected house call is made, the firm can liquidate any holdings they choose.
-You are not entitled to an extension of time on a margin call. Although an extension of time may be available under certain conditions, there is not right to an extension.
-You can lose more money than you deposit in a margin account. A decline in value of the securities purchased on margin may require the investor to provide additional money to the firm to avoid forced sale of those securities or other securities held in the account.
Have you suffered losses resulting from your broker's recommendation to open and trade in a margin account? 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.
Monday, January 14, 2013
INVESTORS NATIONWIDE BEWARE - THERE IS NO SUCH THING AS A FREE LUNCH!
If you have not been invited to a free-meal investment seminar yet, chances are you will be in the near future. If you decide to go, you need to be prepared. This is because financial advisors who host free-meal seminars promise to educate attendees about investing strategies or managing money in retirement - you will also enjoy an expensive meal provided at no cost. However, because someone in a suit buys you lunch or dinner does not mean you have to buy what they are saying or selling. In many cases, free-meal investment seminars are not solely about education. Their ultimate goals are to recruit new clients and sell products - while some sales proposals may be easy for investors to swallow, the consequences can be hard to stomach.
Free investment seminars are popular and widespread. The Financial Industry Regulatory Authority (FINRA) Investor Education Foundation surveyed and found that four out of five investors age 60 and up got at least one invitation to a free investment seminar in the past three years - three out of five got six or more invitations. 25 percent of invitees said that they went to at least one seminar within the three-year period.
There is potentially nothing wrong with a free lunch. However, problems can arise when the speaker has something to sell to the audience. To examine these problems, securities regulators, including FINRA, the Securities and Exchange Commission (SEC), and state regulators, conducted more than 100 examinations involving free-meal seminars. In half the cases, the invitations and advertisements contained claims that appeared to be exaggerated, misleading, or otherwise unwarranted. 12 percent of the seminars appeared to involve fraud, ranging from unfounded projections of returns to sales of fictitious products.
If you are considering attending an investment seminar, the following points should be kept in mind while undergoing a hard sale effort:
-Seminars are designed to sell: Even when advertised as educational, many investment seminars are conducted to sell financial products. Keep in mind that sales pitches might include confusing comparisons of dissimilar products or misleading information about the safety, performance, and returns of the products.
-A good show is not always a good deal: People are generally inclined to take advice from a well-dressed speaker in a high-end restaurant or hotel. This is exactly why investment seminars are held at upscale venues. Be sure to take the time and assess whether the opportunity is right for you.
-The speaker might not be the sponsor: Even if you recognize the names of the individuals who invite you to seminar or speak at the event, they might not be the sponsors. At times, insurance companies or mutual funds finance the events, expecting that the speaker will use the event to drive up sales of their products.
Have you suffered losses resulting from promises made at a free-meal investment seminar? 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.
Free investment seminars are popular and widespread. The Financial Industry Regulatory Authority (FINRA) Investor Education Foundation surveyed and found that four out of five investors age 60 and up got at least one invitation to a free investment seminar in the past three years - three out of five got six or more invitations. 25 percent of invitees said that they went to at least one seminar within the three-year period.
There is potentially nothing wrong with a free lunch. However, problems can arise when the speaker has something to sell to the audience. To examine these problems, securities regulators, including FINRA, the Securities and Exchange Commission (SEC), and state regulators, conducted more than 100 examinations involving free-meal seminars. In half the cases, the invitations and advertisements contained claims that appeared to be exaggerated, misleading, or otherwise unwarranted. 12 percent of the seminars appeared to involve fraud, ranging from unfounded projections of returns to sales of fictitious products.
If you are considering attending an investment seminar, the following points should be kept in mind while undergoing a hard sale effort:
-Seminars are designed to sell: Even when advertised as educational, many investment seminars are conducted to sell financial products. Keep in mind that sales pitches might include confusing comparisons of dissimilar products or misleading information about the safety, performance, and returns of the products.
-A good show is not always a good deal: People are generally inclined to take advice from a well-dressed speaker in a high-end restaurant or hotel. This is exactly why investment seminars are held at upscale venues. Be sure to take the time and assess whether the opportunity is right for you.
-The speaker might not be the sponsor: Even if you recognize the names of the individuals who invite you to seminar or speak at the event, they might not be the sponsors. At times, insurance companies or mutual funds finance the events, expecting that the speaker will use the event to drive up sales of their products.
Have you suffered losses resulting from promises made at a free-meal investment seminar? 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.
Sunday, January 6, 2013
RAYMOND JAMES & ASSOCIATES FINED AND CENSURED FOR CARELESSLY RELEASING CLIENT PERSONAL INFORMATION
Raymond James & Associates has been fined $250,000.00 and censured by the Financial Industry Regulatory Authority (FINRA) for allowing a firm employee to build and maintain an online document management system (DMS) for client records, which was eventually used to reveal client personal information on the internet. After the employee left Raymond James, the individual was no longer authorized to by the firm to receive personally identifiable information (PII) about firm clients. However, a branch office of the firm provided PII of numerous firm clients to the individual, and a second branch office provided the individual with PII of customers and their beneficiaries. FINRA's findings also stated that subsequently, a client complained that her account information and PII were available on the internet. Raymond James had learned that while building and maintaining the DMS, the individual had carelessly posted customer PII to the internet.
FINRA stated that Raymond James contacted the individual, who contacted the search engine to request that the client information be removed, upon notification of the released information. Raymond James then notified regulators of the incident and notified affected clients and their beneficiaries that their PII had been exposed on the internet. The clients and their beneficiaries were offered free credit monitoring and protection services for the incident.
In addition, a firm-approved third-party vendor sent correspondence to clients relating to a cash management account program. Raymond James provided the firms with a list of clients in order to prepare the mailing. The vendor printed and mailed 87,000 mailing envelopes with labels that disclosed each client's account number along with the client's name and address.
Broker-dealers must establish and implement a reasonable supervisory system to protect clients from fraudulent practices by their brokers. If broker-dealers do not establish and/or implement a reasonable supervisory system, they may be liable to investors for damages. According to FINRA, "the firm failed to establish and maintain adequate supervisory systems and procedures to safeguard against the unauthorized disclosure of PII to non-affiliated third parties, and failed to provide customers with opt-out notices prior to disclosing non-public customer information to a non-affiliated third party." Therefore, investors who have suffered damages resulting from such activity can bring forth claims to recover losses against their broker-dealer for failure to take preventative measures.
Have you suffered damages resulting from identity theft while having an account with Raymond James & 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.
FINRA stated that Raymond James contacted the individual, who contacted the search engine to request that the client information be removed, upon notification of the released information. Raymond James then notified regulators of the incident and notified affected clients and their beneficiaries that their PII had been exposed on the internet. The clients and their beneficiaries were offered free credit monitoring and protection services for the incident.
In addition, a firm-approved third-party vendor sent correspondence to clients relating to a cash management account program. Raymond James provided the firms with a list of clients in order to prepare the mailing. The vendor printed and mailed 87,000 mailing envelopes with labels that disclosed each client's account number along with the client's name and address.
Broker-dealers must establish and implement a reasonable supervisory system to protect clients from fraudulent practices by their brokers. If broker-dealers do not establish and/or implement a reasonable supervisory system, they may be liable to investors for damages. According to FINRA, "the firm failed to establish and maintain adequate supervisory systems and procedures to safeguard against the unauthorized disclosure of PII to non-affiliated third parties, and failed to provide customers with opt-out notices prior to disclosing non-public customer information to a non-affiliated third party." Therefore, investors who have suffered damages resulting from such activity can bring forth claims to recover losses against their broker-dealer for failure to take preventative measures.
Have you suffered damages resulting from identity theft while having an account with Raymond James & 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.
Monday, December 31, 2012
HOLD BROTHERS FINED MORE THAN $5.9 MILLION FOR MANIPULATIVE TRADING, ANTI-MONEY LAUNDERING, AND OTHER VIOLATIONS
The Financial Industry Regulatory Authority (FINRA), along with the NYSE, NASDAQ, and BATS Exchange, announced that they have fined and censured Hold Brothers On-Line Investment Services $3.4 million for manipulative trading activities, anti-money laundering (AML), and other violations. In addition, the Securities and Exchange Commission (SEC) announced a settlement with Hold Brothers, fining the firm greater than $2.5 million. In resolving these matters, FINRA and the exchanges took the SEC's action into consideration, which included bars for three Hold Brothers senior managers.
Headquartered in New York, Hold Brothers is a self-clearing broker that provides direct market access to customers and proprietary traders by operating primarily as a day trading firm. Between January 2009 and December 2011, Hold Brothers' biggest accounts, Demonstrate LLC and Trade Alpha, were day trading firms wholly-owned and funded by Hold Brothers' principals. Demonstrate and Alpha engaged traders in numerous countries, mainly in China, to trade its capital. FINRA discovered that Demonstrate and Trade Alpha were under the control of Hold Brothers - hundreds of instances were uncovered where foreign traders used spoofing and layering activities to induce market participants to provide the traders with favorable execution pricing that would not have been available but for such violations.
Spoofing is a type of market manipulation, which involves placing non-bona fide orders, usually inside the National Best Bid or Offer (NBBO), with the intent to cause another market participant to join or improve the NBBO. The non-bona fide order is then canceled, and an order on the opposite side of the market is entered. Layering consists of the placement of multiple, non-bona fide limit orders on one side of the market at various price levels at or away from the NBBO to create the illusion of a change in the levels of supply and demand - this action artificially affects the movement of the price. An order is then executed on the opposite side of the market at the illusory price, and the non-bona fide orders are canceled.
It was also found that Hold Brothers failed to establish and maintain a supervisory system and written procedures that were reasonably designed to supervise trading activities. In addition, Hold Brothers' AML policies were insufficient and failed to detect suspicious transactions. For example, between 2009 and 2011, the firm averaged 400,000 trades per day, 90 of which were placed through the Demonstrate account. Despite the high volume of trading Hold Brothers' AML procedures only provided for manual monitoring to detect suspicious trading in the accounts. Furthermore, there were also numerous instances when Hold Brothers' compliance department determined that Demonstrate and Trade Alpha had engaged in suspicious or manipulative trading. No suspicious activities reports were filled out, and the firm's compliance officer was never informed of the activity.
Have you suffered losses resulting from illegal activity at Hold Brothers? 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.
Headquartered in New York, Hold Brothers is a self-clearing broker that provides direct market access to customers and proprietary traders by operating primarily as a day trading firm. Between January 2009 and December 2011, Hold Brothers' biggest accounts, Demonstrate LLC and Trade Alpha, were day trading firms wholly-owned and funded by Hold Brothers' principals. Demonstrate and Alpha engaged traders in numerous countries, mainly in China, to trade its capital. FINRA discovered that Demonstrate and Trade Alpha were under the control of Hold Brothers - hundreds of instances were uncovered where foreign traders used spoofing and layering activities to induce market participants to provide the traders with favorable execution pricing that would not have been available but for such violations.
Spoofing is a type of market manipulation, which involves placing non-bona fide orders, usually inside the National Best Bid or Offer (NBBO), with the intent to cause another market participant to join or improve the NBBO. The non-bona fide order is then canceled, and an order on the opposite side of the market is entered. Layering consists of the placement of multiple, non-bona fide limit orders on one side of the market at various price levels at or away from the NBBO to create the illusion of a change in the levels of supply and demand - this action artificially affects the movement of the price. An order is then executed on the opposite side of the market at the illusory price, and the non-bona fide orders are canceled.
It was also found that Hold Brothers failed to establish and maintain a supervisory system and written procedures that were reasonably designed to supervise trading activities. In addition, Hold Brothers' AML policies were insufficient and failed to detect suspicious transactions. For example, between 2009 and 2011, the firm averaged 400,000 trades per day, 90 of which were placed through the Demonstrate account. Despite the high volume of trading Hold Brothers' AML procedures only provided for manual monitoring to detect suspicious trading in the accounts. Furthermore, there were also numerous instances when Hold Brothers' compliance department determined that Demonstrate and Trade Alpha had engaged in suspicious or manipulative trading. No suspicious activities reports were filled out, and the firm's compliance officer was never informed of the activity.
Have you suffered losses resulting from illegal activity at Hold Brothers? 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.
Monday, December 24, 2012
INVESTORS NATIONWIDE BEWARE - CHURCH BONDS ARE RISKY AND ILLIQUID INVESTMENTS!
The Financial Industry Regulatory Authority (FINRA) is concerned about sales of church bonds through inappropriate sales practices by brokers. This matter has earned church bonds a spot on FINRA's list of examination and enforcement priorities for 2012. Inappropriate sales of church bonds are usually affiliated with affinity fraud, making it somewhat easier for scam artists to hide the real risks associated with the bonds. This is why FINRA is initiating efforts to prevent broker misconduct and to make sure that firms are performing their due diligence, which will ultimately aid it protecting investors' assets.
Church bonds have numerous risks and problems. Among the risks associated with the bonds is their lack of liquidity. Liquidity issues arises because church bond issuances are small ($10 million or less), which translates into a lack of any secondary market for the bonds to trade in. In addition, the true financial condition and creditworthiness of church bond issuers are difficult to determine because their underlying source of revenue is never really clear. Still, church bond salespersons have been able to capitalize on the low interest rate environment and the desire for a relatively secure source of income, primarily by retirees - the impact of an increasing number of church bond defaults on retirees' investment portfolio has been devastating. This unfortunate reality was sparked by the general economic decline, which hindered the ability of many churches to pay their debt due to a slowdown in church donations.
The law requires broker-dealers and investment advisers to perform adequate due diligence before recommending investments such as church bonds to their clients. Some of the responsibilities include: 1) having a reasonable basis to believe that the investment is suitable; 2) examining the risks associated with the investment; and 3) making full disclosure of the risks associated with the investment. Unfortunately, these responsibilities often go unfulfilled. Therefore, investors can bring forth claims against broker-dealers for losses incurred.
Affinity fraud is a form of illegal conduct typically associated with an appeal to a common interest. Some examples of a common interest include a church, club, and cultural association. Scam artists target and exploit the tendency of members to ascribe to the trustworthiness of a fellow member. In the case of a church, scam artists pitch the notion that the funds will be to support the mission of the church.
Have you suffered losses in church bonds? 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.
Church bonds have numerous risks and problems. Among the risks associated with the bonds is their lack of liquidity. Liquidity issues arises because church bond issuances are small ($10 million or less), which translates into a lack of any secondary market for the bonds to trade in. In addition, the true financial condition and creditworthiness of church bond issuers are difficult to determine because their underlying source of revenue is never really clear. Still, church bond salespersons have been able to capitalize on the low interest rate environment and the desire for a relatively secure source of income, primarily by retirees - the impact of an increasing number of church bond defaults on retirees' investment portfolio has been devastating. This unfortunate reality was sparked by the general economic decline, which hindered the ability of many churches to pay their debt due to a slowdown in church donations.
The law requires broker-dealers and investment advisers to perform adequate due diligence before recommending investments such as church bonds to their clients. Some of the responsibilities include: 1) having a reasonable basis to believe that the investment is suitable; 2) examining the risks associated with the investment; and 3) making full disclosure of the risks associated with the investment. Unfortunately, these responsibilities often go unfulfilled. Therefore, investors can bring forth claims against broker-dealers for losses incurred.
Affinity fraud is a form of illegal conduct typically associated with an appeal to a common interest. Some examples of a common interest include a church, club, and cultural association. Scam artists target and exploit the tendency of members to ascribe to the trustworthiness of a fellow member. In the case of a church, scam artists pitch the notion that the funds will be to support the mission of the church.
Have you suffered losses in church bonds? 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.
Friday, December 21, 2012
THE SEC AND FINRA WARN INVESTORS NATIONWIDE ABOUT PRINCIPAL PROTECTED NOTES
Both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have issued an alert to investors titled Structured Notes with Principal Protection: Note the Terms of Your Investment. The alert contains information pertaining to how principal protected notes are structured and the risks associated with investing in them. A few examples of what the SEC and FINRA want investors to know about principal protected notes is that they can have complex payout structures, principal lockup periods, and caps on returns. Most importantly, they want investors to know that principal protection is sometimes limited to just 10% of the original investment, and payment will depend on the financial strength of the issuing institution.
A Principal protected note is an investment contract with a guaranteed rate of return of at least the amount invested. Traditional fixed-income investments such as CDs and bonds provide investment security and modest returns with little or no risk of capital loss, while stocks have the potential to deliver greater returns, but with much greater risk. In recent years, investors have turned to structured products such as principal protected notes that offer both security and potential growth for their principal. Principal protected notes are linked to a broad range of underlying investments that may include indices, mutual funds, equities, and even alternative offerings such as hedge funds. At the heart of a principal protected note is a guarantee - typically guaranteeing 100% of invested capital, as long as the note is held to maturity. This means that regardless of market conditions, investors receive back all money they invested plus appreciation from the underlying assets, if any.
The alert recommends that investors consider the following questions before investing in a principal protected note:
-What are the costs?
-Are there any conditions for protection?
-What type of principal protection is offered?
-What are the potential risks?
-Will the product meet investment objectives?
-Are there alternative investment options?
-What is the payout structure?
-Are there tax implications?
-Is there a cap on gains?
-Is a call feature provided?
-Is liquidation permitted prior to maturity?
-For how long will the money be locked up?
Investors must also understand that principal protected notes are subject to the credit risk of the issuer. Consequently, if an issuer is not financially sound, it cannot guarantee 100% redemption of principal at maturity to an investor if the underlying investment deteriorates in value. That is why investors, especially those in retirement, should not be misled by the words "principal protected," no matter how appealing the investment is perceived to be.
Have you suffered a loss in a principal protected note? 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.
A Principal protected note is an investment contract with a guaranteed rate of return of at least the amount invested. Traditional fixed-income investments such as CDs and bonds provide investment security and modest returns with little or no risk of capital loss, while stocks have the potential to deliver greater returns, but with much greater risk. In recent years, investors have turned to structured products such as principal protected notes that offer both security and potential growth for their principal. Principal protected notes are linked to a broad range of underlying investments that may include indices, mutual funds, equities, and even alternative offerings such as hedge funds. At the heart of a principal protected note is a guarantee - typically guaranteeing 100% of invested capital, as long as the note is held to maturity. This means that regardless of market conditions, investors receive back all money they invested plus appreciation from the underlying assets, if any.
The alert recommends that investors consider the following questions before investing in a principal protected note:
-What are the costs?
-Are there any conditions for protection?
-What type of principal protection is offered?
-What are the potential risks?
-Will the product meet investment objectives?
-Are there alternative investment options?
-What is the payout structure?
-Are there tax implications?
-Is there a cap on gains?
-Is a call feature provided?
-Is liquidation permitted prior to maturity?
-For how long will the money be locked up?
Investors must also understand that principal protected notes are subject to the credit risk of the issuer. Consequently, if an issuer is not financially sound, it cannot guarantee 100% redemption of principal at maturity to an investor if the underlying investment deteriorates in value. That is why investors, especially those in retirement, should not be misled by the words "principal protected," no matter how appealing the investment is perceived to be.
Have you suffered a loss in a principal protected note? 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.
Thursday, December 20, 2012
WATCH OUT NON-TRADED REIT INVESTORS: YOU ARE DESTINED TO LOSE!
According to a study performed by BlueVault Partners LLC and the University of Texas at Austin's McCombs School of Business, non-traded REITS consistently underperform the broad market of real estate investing in large part because of the high fees and commissions associated with these investments (the fees for non-traded REITs are often as high as 12-15%). The study found that 70% of the non-traded REITs included in the study underperformed basic benchmarks. The study is particularly timely as the initial public offering market for non-traded REITs, known in the industry as a "liquidity event" or "going full cycle," has heated up this year. Since March, three non-traded REITs have listed on exchanges, with more likely to come, each with limited to no success.
Notwithstanding the poor track record of these investments, brokerage firms have only increased the sale of such products. According to an executive summary of the study performed the non-traded REIT industry had $84 billion in assets under management at the end of 2011 (representing huge growth in the industry). Certainly, an inference can be made that the industry is actively looking to grow this investment area because of the very commissions that makes it so difficult for these investments to succeed.
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.
Notwithstanding the poor track record of these investments, brokerage firms have only increased the sale of such products. According to an executive summary of the study performed the non-traded REIT industry had $84 billion in assets under management at the end of 2011 (representing huge growth in the industry). Certainly, an inference can be made that the industry is actively looking to grow this investment area because of the very commissions that makes it so difficult for these investments to succeed.
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.
Saturday, December 15, 2012
THE SEC RECOMMENDS THAT CONGRESS CHARACTERIZE VIATICAL SETTLEMENTS AS SECURITIES IN ORDER TO PROTECT INVESTORS NATIONWIDE
In order to provide viatical settlement investors with federal securities law protection, the Securities and Exchange Commission (SEC) is recommending that Congress define viatical settlements as securities. The following benefits were proposed in the SEC's report: 1) the SEC and the Financial Industry Regulatory Authority (FINRA) would have authority to oversee the viatical settlement market, which could aid in detecting fraud and dishearten abuses; 2) the states and federal government would be able to deal with viatical settlement issues in a more consistent manner; and 3) viatical settlement market intermediaries would fall under the regular framework of both the SEC and FINRA. The task force created the report due to the inconsistent regulation of market participants.
A viatical settlement is the sale of an owner's life insurance policy to a third party for more than the cash surrender value, but less than its net death benefit. The seller of the policy is benefited with a lump sum payment. The buyer of the policy pays the monthly premium and receives the benefit of the policy when the seller or the insured dies. Viatical settlement transactions typically involve an insured who is terminally or chronically ill. A person who is terminally or chronically ill has a life expectancy of less than two years. From an investor's perspective, the return will depend on the seller's life expectancy and date of death. Therefore, viatical settlements cannot be equated with zero coupon bonds because the date of death or maturity is uncertain.
The SEC is also urging Congress to regulate life expectancy underwriters in a more consistent manner, enforce legal standards of conduct upon brokers and providers, and look for the development of a viatical settlement securitization market.
The subject of viatical settlements has not gone unnoticed within Congress, as well. US Senator Herb Kohl released a General Accountability Office report expressing his concern for the inconsistent regulation of viatical settlements. Some of the challenges mentioned are less protection for investors in certain states, the lack information and risk disclosure, and broker dilemmas due to inconsistent laws across the states.
Have you suffered a loss in a viatical settlement? 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.
A viatical settlement is the sale of an owner's life insurance policy to a third party for more than the cash surrender value, but less than its net death benefit. The seller of the policy is benefited with a lump sum payment. The buyer of the policy pays the monthly premium and receives the benefit of the policy when the seller or the insured dies. Viatical settlement transactions typically involve an insured who is terminally or chronically ill. A person who is terminally or chronically ill has a life expectancy of less than two years. From an investor's perspective, the return will depend on the seller's life expectancy and date of death. Therefore, viatical settlements cannot be equated with zero coupon bonds because the date of death or maturity is uncertain.
The SEC is also urging Congress to regulate life expectancy underwriters in a more consistent manner, enforce legal standards of conduct upon brokers and providers, and look for the development of a viatical settlement securitization market.
The subject of viatical settlements has not gone unnoticed within Congress, as well. US Senator Herb Kohl released a General Accountability Office report expressing his concern for the inconsistent regulation of viatical settlements. Some of the challenges mentioned are less protection for investors in certain states, the lack information and risk disclosure, and broker dilemmas due to inconsistent laws across the states.
Have you suffered a loss in a viatical settlement? 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.
Thursday, December 13, 2012
NON-TRADED REIT VALUATIONS VERY MURKY
The problems with these investments 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 which was no doubt the real driving force in recommending the investments).
The main complaint of REIT investors relates to the problems in the valuation of these investments. They are murky-not transparent. 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.
Also, the conflict of interest in having the sponsor of the non-traded REIT establish the valuation of the REIT is obvious.
Notwithstanding this obvious conflict, certain non-traded REITs are still fighting the manner in which valuations will be done in the future. The Investment News recently reported that the non-traded-REIT industry is deeply divided about valuations as regulators prepare to codify rules on creating an estimated share value for these products. A key sticking point is whether REITs and other private investments should use an independent third party to conduct appraisals. Apparently certain non-traded REIT sponsors argued that the wide variety of private-investment products makes mandatory third-party appraisals inappropriate.
It also appears that the proposed changes in the FINRA rules may be moving in the wrong direction. Under the new proposal, broker-dealers no longer would be required to provide a per-share estimated value, unless the issuer provided an estimate based upon an appraisal of assets and liabilities in a periodic or current report under the Securities and Exchange Act of 1934. Instead, during the initial offering period, broker-dealers would have the option of using a modified net offering price or designating the securities as "not priced." The "not priced" method would be a step backward and open the door for more fraud. According to Robert Pearce, It is reminiscent of the way limited partnerships were priced and the widespread fraud with those investments twenty years ago. Instead of allowing broker-dealers to cloud the REIT waters, Wall Street regulators must force them to become transparent in all respects, including valuations and commissions.
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.
The main complaint of REIT investors relates to the problems in the valuation of these investments. They are murky-not transparent. 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.
Also, the conflict of interest in having the sponsor of the non-traded REIT establish the valuation of the REIT is obvious.
Notwithstanding this obvious conflict, certain non-traded REITs are still fighting the manner in which valuations will be done in the future. The Investment News recently reported that the non-traded-REIT industry is deeply divided about valuations as regulators prepare to codify rules on creating an estimated share value for these products. A key sticking point is whether REITs and other private investments should use an independent third party to conduct appraisals. Apparently certain non-traded REIT sponsors argued that the wide variety of private-investment products makes mandatory third-party appraisals inappropriate.
It also appears that the proposed changes in the FINRA rules may be moving in the wrong direction. Under the new proposal, broker-dealers no longer would be required to provide a per-share estimated value, unless the issuer provided an estimate based upon an appraisal of assets and liabilities in a periodic or current report under the Securities and Exchange Act of 1934. Instead, during the initial offering period, broker-dealers would have the option of using a modified net offering price or designating the securities as "not priced." The "not priced" method would be a step backward and open the door for more fraud. According to Robert Pearce, It is reminiscent of the way limited partnerships were priced and the widespread fraud with those investments twenty years ago. Instead of allowing broker-dealers to cloud the REIT waters, Wall Street regulators must force them to become transparent in all respects, including valuations and commissions.
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 SIMPLIFIED ARBITRATION CAP RAISED
A new Financial Industry Regulatory Authority (FINRA) rule may make it easier for small investors to recover investment losses. Effective July 23, 2012, the new FINRA Rule 12800, relating to Simplified Arbitration, will apply to arbitrations involving $50,000 or less, exclusive of interest and expenses. The previous cap was $25,000. This change should make it easier for investors to recover who have suffered relatively smaller losses as the result of misconduct or wrongdoing.
Simplified arbitration provides a relatively streamlined, lower-cost way to hear claims that might otherwise not be economically feasible for claimants to bring. Generally, a single arbitrator decides the case based entirely upon the paper submissions filed by the parties, without an in-person hearing or telephonic conference. While the rule provides that the parties may obtain discovery, and the arbitrators have discretion to require parties to produce documents responsive to relevant portions of FINRA's document production lists, in practice, discovery is usually not undertaken.
You need to be very careful and attach all relevant documents to the statement of claim, so that the arbitrator has everything needed to decide the case. And then you need to connect the documents to your argument to be sure you have a chance at recovery.
But many experienced FINRA arbitration attorneys agree, the procedure is not without risk. The absence of any dialogue with the arbitrator makes it difficult to advocate an investor's complaint.
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.
Simplified arbitration provides a relatively streamlined, lower-cost way to hear claims that might otherwise not be economically feasible for claimants to bring. Generally, a single arbitrator decides the case based entirely upon the paper submissions filed by the parties, without an in-person hearing or telephonic conference. While the rule provides that the parties may obtain discovery, and the arbitrators have discretion to require parties to produce documents responsive to relevant portions of FINRA's document production lists, in practice, discovery is usually not undertaken.
You need to be very careful and attach all relevant documents to the statement of claim, so that the arbitrator has everything needed to decide the case. And then you need to connect the documents to your argument to be sure you have a chance at recovery.
But many experienced FINRA arbitration attorneys agree, the procedure is not without risk. The absence of any dialogue with the arbitrator makes it difficult to advocate an investor's complaint.
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.
Wednesday, December 12, 2012
MUTUAL FUNDS INVESTORS NATIONWIDE MIGHT BE ENTITLED TO BREAKPOINT DISCOUNTS THEY NEVER RECEIVED
Investors nationwide might be eligible for a refund of the front-end sales charge they paid when they purchased Class A shares of a mutual fund from their respective securities firms. An industry-wide survey taken showed that investors did not receive discounts in one out of every five transactions that were eligible for discounts. Front-end sales discounts are offered to customers who are making large mutual fund investments - usually between $25,000.00 and $50,000.00. The Financial Industry Regulatory Authority (FINRA) is expecting firms to make refunds to their customers where they are aware that their customers did not receive a discount to which they were entitled. In addition, FINRA is expecting firms to make refunds when clients come forward and show that they did not receive all applicable discounts.
Mutual funds typically offer more than one "class" of shares to investors. Each class represents the same interest in the mutual fund, but the sales charges, fees, and expenses will vary. For example, Class A shares require investors to pay a front-end sales charge or "load" that is deducted from the initial investment amount - a 5% front-end sales load at a cost of $1,000 will generate a $50 sales load with $950 remaining invested in the mutual fund. Investors may qualify for a breakpoint discounts in a number of ways: 1) the amount invested exceeds a breakpoint threshold; 2) a letter of intent is written stating that the customer will invest an amount greater than a break-point threshold within a specified time established by the fund; and 3) having rights of accumulation, which allow customers to combine future purchases with earlier ones to exceed a break-point threshold. Each mutual fund family sets its own breakpoint discounts and sets the rules regarding which accounts will count towards breakpoint discounts.
Securities firms must make a refund if an investor has a valid claim that he or she was overcharged. In fact, many firms have already begun to refund excessive front-end sales load charges to their customers. FINRA is directing more than 450 securities firms to notify customers who purchased Class A mutual fund shares since 1999 that they may be due discounts resulting from their respective firms' failure to provide breakpoint discounts. FINRA is also requiring nearly 175 of those firms with poor records of providing breakpoint discounts to complete a comprehensive review of transactions since 2001 for possible missed discount opportunities.
Do you believe you are entitled to breakpoint discounts, but have not yet received a refund? 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.
Mutual funds typically offer more than one "class" of shares to investors. Each class represents the same interest in the mutual fund, but the sales charges, fees, and expenses will vary. For example, Class A shares require investors to pay a front-end sales charge or "load" that is deducted from the initial investment amount - a 5% front-end sales load at a cost of $1,000 will generate a $50 sales load with $950 remaining invested in the mutual fund. Investors may qualify for a breakpoint discounts in a number of ways: 1) the amount invested exceeds a breakpoint threshold; 2) a letter of intent is written stating that the customer will invest an amount greater than a break-point threshold within a specified time established by the fund; and 3) having rights of accumulation, which allow customers to combine future purchases with earlier ones to exceed a break-point threshold. Each mutual fund family sets its own breakpoint discounts and sets the rules regarding which accounts will count towards breakpoint discounts.
Securities firms must make a refund if an investor has a valid claim that he or she was overcharged. In fact, many firms have already begun to refund excessive front-end sales load charges to their customers. FINRA is directing more than 450 securities firms to notify customers who purchased Class A mutual fund shares since 1999 that they may be due discounts resulting from their respective firms' failure to provide breakpoint discounts. FINRA is also requiring nearly 175 of those firms with poor records of providing breakpoint discounts to complete a comprehensive review of transactions since 2001 for possible missed discount opportunities.
Do you believe you are entitled to breakpoint discounts, but have not yet received a refund? 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.
Tuesday, December 11, 2012
JEFFREY WAYNE CIMBAL OF STATE TRUST INVESTMENTS, INC. SUSPENDED AND FINED BY FINRA FOR FAILING TO REVIEW CUSTOMER TRANSACTIONS
The Financial Industry Regulatory Authority (FINRA) has fined Jeffrey Wayne Cimbal $20,000.00 and suspended him from association with any FINRA member in any principal capacity for five months for failure to review customers' corporate debt or bond transactions. Mr. Cimbal was the Chief Compliance Officer ("CCO") of State Trust Investments, Inc. FINRA determined that Mr. Cimbal failed to detect two representatives' numerous corporate debt transactions that did not provide customers best execution and/or involved interpositioning of an affiliated account. Mr. Cimbal consented to the sanctions and to the findings that he served as his member firm's CCO and for more than three years was in charge of reviewing transactions to ensure that customers received best execution and to conduct surveillance for trading patterns that could potentially violate FINRA rules and federal securities laws.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from abuses. Assuming that a reasonable supervisory system was established by State Trust Investments, Mr. Cimbal failed to take sufficient supervisory action to prevent the trading pattern from continuing. The net result was that the firm and/or accounts of its affiliates made excessive profits from the trading.
If broker-dealers do not establish and/or implement a reasonable supervisory system, they may be liable to investors for damages. In the case of Mr. Cimbal, FINRA found that adequate procedures were not implemented to detect and prevent the trading patterns. Therefore, investors who have suffered damages can bring forth claims to recover losses against State Trust Investments.
Did you suffer losses resulting from State Trust Investments' excessive trading pattern? 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.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from abuses. Assuming that a reasonable supervisory system was established by State Trust Investments, Mr. Cimbal failed to take sufficient supervisory action to prevent the trading pattern from continuing. The net result was that the firm and/or accounts of its affiliates made excessive profits from the trading.
If broker-dealers do not establish and/or implement a reasonable supervisory system, they may be liable to investors for damages. In the case of Mr. Cimbal, FINRA found that adequate procedures were not implemented to detect and prevent the trading patterns. Therefore, investors who have suffered damages can bring forth claims to recover losses against State Trust Investments.
Did you suffer losses resulting from State Trust Investments' excessive trading pattern? 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.
Monday, December 10, 2012
FINANCIAL INDUSTRY REGULATORY AUTHORITY (FINRA) RULE 2111 EXPANDS STOCKBROKER DUTIES OWED TO CUSTOMERS
The new FINRA rule 2111 clarifies the suitability standard as follows:
1. It codifies the three main suitability obligations requiring brokers to (i) perform due diligence to understand the risks of an investment or investment strategy, and determine whether it is suitable for anyone, (ii) have a reasonable basis for believing the investment or investment strategy is suitable for the particular customer based on that customer's investment profile; and (iii) have a reasonable basis for believing that a series of securities transactions are not excessive (if the broker has control over the account).
2. It expands the factors that brokers must consider when making recommendations to customers to include age, investment experience, time horizon, liquidity needs, and risk tolerance, as well as other factors.
3. It covers recommendations of investment strategies (not just securities transactions), which it defines broadly to include recommendations to "hold" (or refrain from selling) a security, even one that the broker did not make the original recommendation to purchase.
In Regulatory Notice 12-25 (captioned "Suitability - Additional Guidance on FINRA's New Suitability Rule"), FINRA further explicitly reaffirms that "a broker's recommendation must be consistent with his customer's best interests," and that this "prohibits a broker from placing his or her interests ahead of the customer's interests." The hallmark of a fiduciary is the requirement to always put the client's interests first. Thus, according to FINRA, brokerage firms and their registered representatives are subject to a fiduciary standard of care when they recommend an investment or investment strategy.
Regulatory Notice 12-25 also clarifies that the term "customer" includes a potential customer or anyone with whom the firm has even an informal business relationship, even if that person does not have an account at the firm. An investor takes a huge risk when cashing in pension assets on the advice of a broker, which is often before the investor has opened an account with the firm. Thus FINRA's own written guidance debunks the argument that the firm owed no duty under those circumstances because the investor was "not a customer."
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.
1. It codifies the three main suitability obligations requiring brokers to (i) perform due diligence to understand the risks of an investment or investment strategy, and determine whether it is suitable for anyone, (ii) have a reasonable basis for believing the investment or investment strategy is suitable for the particular customer based on that customer's investment profile; and (iii) have a reasonable basis for believing that a series of securities transactions are not excessive (if the broker has control over the account).
2. It expands the factors that brokers must consider when making recommendations to customers to include age, investment experience, time horizon, liquidity needs, and risk tolerance, as well as other factors.
3. It covers recommendations of investment strategies (not just securities transactions), which it defines broadly to include recommendations to "hold" (or refrain from selling) a security, even one that the broker did not make the original recommendation to purchase.
In Regulatory Notice 12-25 (captioned "Suitability - Additional Guidance on FINRA's New Suitability Rule"), FINRA further explicitly reaffirms that "a broker's recommendation must be consistent with his customer's best interests," and that this "prohibits a broker from placing his or her interests ahead of the customer's interests." The hallmark of a fiduciary is the requirement to always put the client's interests first. Thus, according to FINRA, brokerage firms and their registered representatives are subject to a fiduciary standard of care when they recommend an investment or investment strategy.
Regulatory Notice 12-25 also clarifies that the term "customer" includes a potential customer or anyone with whom the firm has even an informal business relationship, even if that person does not have an account at the firm. An investor takes a huge risk when cashing in pension assets on the advice of a broker, which is often before the investor has opened an account with the firm. Thus FINRA's own written guidance debunks the argument that the firm owed no duty under those circumstances because the investor was "not a customer."
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.
Wednesday, December 5, 2012
VARIABLE ANNUITIES LISTED AMONG FINRA'S NATIONWIDE DISCIPLINARY ACTIONS
The Financial Industry Regulatory Authority (FINRA) recently reported that it will focus its attention on examining products that are held out to outperform the market. According to FINRA, the economic environment that many investors have faced since 2008 has fostered an increase in appetite for high yield investments given the low yield in Treasuries. It has also fostered fraud, misappropriation, illegal sales practices, and unsuitable recommendations by brokers. Some of the products FINRA will be focusing on are: variable annuities, non-traded real estate investment trusts, municipal offerings, leveraged exchange traded funds, mortgage-backed securities, private placements, structured products, and life settlements. FINRA will also look into fee schemes since it is concerned that broker-dealers are charging their clients hidden, mislabeled, or excessive fees. Several cases have already been filed by FINRA against firms who have been taking advantage of their clients through fees.
An annuity is a form of insurance that offers a series of payments for a period of time. Variable annuities are typically higher in risk when compared other types of annuities and depend on how the stock market is performing. Buyers have the option to allocate the cash invested into different types of assets such as mutual funds, indices, fixed income investments or bonds, and cash. Variable annuities do not guarantee principal protection, so investors can lose money if markets deteriorate.
With respect to variable annuity costs, an agent can collect at least 5% from the moment of sale and 0.5% or more every year for the life of the investment; variable annuities with common riders can take over 3% off annual returns. Surrender charges of as much as 9% may apply if an investor is in need of cash due to an unexpected emergency. Also, insurance companies are offering Guaranteed Lifetime Withdrawal Benefits (GLWB) without clearly telling investors the costs associated with taking early distributions. GLWBs allow percentage withdrawals based on the total amount without having to annuitize the investment. The problem with GLWBs is the immense cost of withdrawal, which is hidden away from investors in the terms of the agreement.
Have you suffered a loss of principal in your variable annuity? 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.
An annuity is a form of insurance that offers a series of payments for a period of time. Variable annuities are typically higher in risk when compared other types of annuities and depend on how the stock market is performing. Buyers have the option to allocate the cash invested into different types of assets such as mutual funds, indices, fixed income investments or bonds, and cash. Variable annuities do not guarantee principal protection, so investors can lose money if markets deteriorate.
With respect to variable annuity costs, an agent can collect at least 5% from the moment of sale and 0.5% or more every year for the life of the investment; variable annuities with common riders can take over 3% off annual returns. Surrender charges of as much as 9% may apply if an investor is in need of cash due to an unexpected emergency. Also, insurance companies are offering Guaranteed Lifetime Withdrawal Benefits (GLWB) without clearly telling investors the costs associated with taking early distributions. GLWBs allow percentage withdrawals based on the total amount without having to annuitize the investment. The problem with GLWBs is the immense cost of withdrawal, which is hidden away from investors in the terms of the agreement.
Have you suffered a loss of principal in your variable annuity? 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.
Tuesday, December 4, 2012
JEFFREY WAYNE CIMBAL OF STATE TRUST INVESTMENTS, INC. SUSPENDED AND FINED BY FINRA FOR FAILING TO REVIEW CUSTOMER TRANSACTIONS
The Financial Industry Regulatory Authority (FINRA) has fined Jeffrey Wayne Cimbal $20,000.00 and suspended him from association with any FINRA member in any principal capacity for five months for failure to review customers' corporate debt or bond transactions. Mr. Cimbal was the Chief Compliance Officer ("CCO") of State Trust Investments, Inc. FINRA determined that Mr. Cimbal failed to detect two representatives' numerous corporate debt transactions that did not provide customers best execution and/or involved interpositioning of an affiliated account. Mr. Cimbal consented to the sanctions and to the findings that he served as his member firm's CCO and for more than three years was in charge of reviewing transactions to ensure that customers received best execution and to conduct surveillance for trading patterns that could potentially violate FINRA rules and federal securities laws.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from abuses. Assuming that a reasonable supervisory system was established by State Trust Investments, Mr. Cimbal failed to take sufficient supervisory action to prevent the trading pattern from continuing. The net result was that the firm and/or accounts of its affiliates made excessive profits from the trading.
If broker-dealers do not establish and/or implement a reasonable supervisory system, they may be liable to investors for damages. In the case of Mr. Cimbal, FINRA found that adequate procedures were not implemented to detect and prevent the trading patterns. Therefore, investors who have suffered damages can bring forth claims to recover losses against State Trust Investments.
Did you suffer losses resulting from State Trust Investments' excessive trading pattern? 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.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from abuses. Assuming that a reasonable supervisory system was established by State Trust Investments, Mr. Cimbal failed to take sufficient supervisory action to prevent the trading pattern from continuing. The net result was that the firm and/or accounts of its affiliates made excessive profits from the trading.
If broker-dealers do not establish and/or implement a reasonable supervisory system, they may be liable to investors for damages. In the case of Mr. Cimbal, FINRA found that adequate procedures were not implemented to detect and prevent the trading patterns. Therefore, investors who have suffered damages can bring forth claims to recover losses against State Trust Investments.
Did you suffer losses resulting from State Trust Investments' excessive trading pattern? 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.
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