FINRA FINES AND SUSPENDS FRANK JOHN TARAZON FOR BORROWING ELDERLY CUSTOMER'S FUNDS

Frank John Tarazon, a former broker at Des Moines, Iowa based ING Financial Partners, Inc., submitted a Letter of Acceptance, Waiver and Consent in which he consented to the described sanctions and to the entry of the Financial Industry Regulatory Authority's (FINRA) findings that he borrowed a total of $368,692 from an elderly customer contrary to his member firm's policies and procedures, which prohibited registered representatives from borrowing money from customers, except from immediate family members. The findings stated that Mr. Tarazon never sought permission to borrow funds from the customer, and the firm was unaware of the customer's loans to Mr. Tarazon. The findings also stated that Mr. Tarazon maintained or had a financial interest in brokerage accounts held outside his member firm without providing the firm with written notice of these accounts or receiving the firm's prior approval to open or hold an interest in the accounts. The findings further included that Mr. Tarazon was designated as a successor trustee to the customer's trust and as a beneficiary to that trust. Mr. Tarazon's firm's policies and procedures prohibited registered representatives from being named as a beneficiary on an account or from acting in the capacity of a guardianship, conservator, trustee, power of attorney, or any similar type of relationship on behalf of any unrelated person without first obtaining the firm's written approval. This prohibition included acting as a beneficiary of a trust or estate. FINRA found that during his firm's annual inspections, Mr. Tarazon falsely stated to his supervisor that he did not have any undisclosed outside brokerage accounts. Mr. Tarazon also falsely stated on annual business questionnaires that he had not been named as a trustee or beneficiary of a customer's trust.

Mr. Tarazon, of Oxnard, California, was fined $20,000 and suspended from association with any FINRA member in any capacity for six months. The fine must be paid either immediately upon Mr. Tarazon's re-association with a FINRA member firm following his suspension, or prior to the filing of any application or request for relief from any statutory disqualification, whichever is earlier. The suspension is in effect from April 15, 2013 through October 14, 2013.

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 broker's violation of firm policies and procedures can bring forth claims to recover losses against broker-dealers such as ING Financial Partners. Have you suffered losses in your ING Financial Partners, Inc. account due to broker misconduct? 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 Mr. Tarazon and ING Financial Partners, Inc. whose stockbrokers 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.

EX-LPL FINANCIAL LLC ADVISER BLAKE RICHARDS CHARGED WITH DEFRAUDING INVESTORS AND MISAPPROPRIATING MILLIONS

Blake Richards, a broker formerly with LPL Financial LLC, was charged by the Securities and Exchange Commission (SEC) with defrauding investors and misappropriating $2 million from at least six clients. According to the complaint filed in U.S. District Court for the Northern District of Georgia., Mr. Richards misappropriated client money that constituted retirement savings and/or life insurance proceeds from deceased spouses. The SEC complaint also stated that in order to gain one investor's trust, Mr. Richards went so far as to deliver pain medication during a snowstorm to a client's husband who had been diagnosed with terminal pancreatic cancer. Mr. Richards was an LPL Financial broker from May 2009 until May 2013.

According to the SEC's complaint, Mr. Richards' customers told him they had funds to invest from retirement accounts or proceeds from a life insurance policy. Mr. Richards allegedly told them to write out checks to an entity called "Blake Richards Investments" or "BMO Investments." As a result, the SEC's complaint stated that "Richards, whose production at LPL Financial had been virtually nonexistent over the past few years, began siphoning off funds from clients, and converting them for his personal use."

The charges against Mr. Richards came not too long after LPL Financial, the largest independent broker-dealer with more than 13,000 reps and advisers, was hit with fines and restitution orders. In May 2013, the Financial Industry Regulatory Authority (FINRA) fined LPL Financial $7.5 million for 35 separate e-mail system failures. Also in May 2013, Massachusetts securities regulators said LPL Financial had been ordered to pay $4.8 million in restitution to investors over improper sales of non-traded real estate investment trusts, which was more than double the amount originally revealed - Massachusetts regulators in February 2013 had said LPL would be required to set aside at least $2.2 million in restitution.

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. Therefore, investors who have suffered damages due to Mr. Richards' illegal conduct can bring forth claims to recover losses against LPL Financial, which should have prevented Mr. Richards from committing the described illegal acts.

Have you suffered losses in your LPL Financial investment resulting from broker misconduct? 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 stockbrokers who have defrauded investors and/or misappropriated investors' funds.

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.

INVESTORS NATIONWIDE BEWARE OF ALTERNATIVE BOND FUNDS!

Alternative bond funds, which are typically touted as strategic-income funds, have been marketed to financial advisers or stockbrokers as a way to avoid the risk of rising interest rates, which concerns bond or fixed income investors. Most alternative bond funds, however, were unable to live up to that potential.

Generally, alternative bond funds have the ability to sell short and invest across a variety of markets in order to lessen the blow of rising rates, but those strategies came up short as the 10-year Treasury's yield shot up 46 basis points in May 2013. On average, the funds finished the month with a 0.46% loss. The largest alternative bond fund, the $26 billion Pimco Unconstrained Bond Fund (PUBAX), lost 0.54%, which was worse than the category's average.

Recent interest rate movements were the first real test for alternative bond funds, and the results were unremarkable. Nadia Papagiannis, a Morningstar Inc. mutual fund analyst, said "the reason for the one-month performance woes essentially boils down to the managers not being hedged against rising rates - the funds are basically long credit with the option to hedge." Ms. Papagiannis added that "most of the time, they're not hedged." So, what advisers in these funds are betting on is that the managers will be able to time the market when it comes time to hedge. "That's hard to do," Ms. Papagiannis said.

Have you suffered losses in alternative bond funds sold to you 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 stockbrokers who recommended unsuitable investments and unsuitable investment strategies that 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.

INVESTORS NATIONWIDE BEWARE - ACTIVELY TRADED ETFS WILL ADD RISK TO YOUR PORTFOLIO!

The Securities and Exchange Commission (SEC) recently unveiled a policy change that could have a major impact on an exchange traded fund's (ETFs) risk profile. In essence, the SEC has lifted its suspension on the use of derivatives by certain ETFs. This move is in response to pressure from the industry, and it is expected to result in a major increase in the number of actively managed ETFs. Managers will now be able to use derivatives in their investment strategies in order to hedge against risk. Problem is derivatives are also widely used to speculate in order to increase profits, which most certainly increases risk. Fortunately, the SEC is keeping its freeze in place for leveraged and inverse exchange traded funds - funds that can deal a bigger blow to investors because of their use of borrowed funds to increase profits.
ETFs are investment funds that are traded on stock exchanges, much like stocks. An ETF holds assets such as stocks, commodities, or bonds, and trades close to its net asset value over the course of the trading day. Most ETFs track an index, such as a stock index or bond index and are attractive investments because of their low costs, tax efficiency, and stock-like features. By owning an ETF, investors benefit from the diversification of an index fund as well as the ability to purchase as little as one share. In addition, expense ratios for most ETFs are lower than those of the average mutual fund. When buying and selling ETFs, investors pay the same commission to their brokers that they would pay on any regular stock order.
Investors should be concerned with the lifting of the derivatives suspension for ETFs because it will most likely affect management's investment strategy and investors' portfolios. Currently, there are 7,149 mutual funds and 1,444 ETFs. Approximately 6,836 mutual funds are actively managed, and only 54 ETFs are actively managed thus far. With expectations of a rise in actively traded ETFs, Investors and their advisors should review their ETF holdings for any changes in investment strategy and determine whether it is suitable for them. That way, investors can avoid learning the hard way what actively traded ETFs are all about and prevent future monetary losses.
Have you suffered losses resulting from actively traded ETFs? 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 unsuitable investments such as actively traded ETFs 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.

WHAT CAN I DO TO SELL MY HINES REAL ESTATE INVESTMENT TRUST?

Many investors in the Hines Real Estate Investment Trust have called our office and asked the same question: Is there any way I can sell my Hines REIT? This is due to the fact that Hines Real Estate Investment Trusts are non-traded, which means that they do not trade on any public exchange. Unless real estate investment trust (REIT) companies such as Hines decide to register with the Securities and Exchange Commission (SEC) and make a public offering of its shares, investors will most likely not be able to sell their shares and will remain at the mercy of the REITs' performance. But wagering on better performance by non-traded REITs in the near future does not seem to be a viable option for investors to hold their shares either since many non-traded REITs have ceased their buy-back programs and are no longer making promised monthly or quarterly distributions to investors - a universal sign of ruinous events to come for REIT investors.
Unfortunately, the only way to sell your REIT is privately or through an auction through one of several companies making a secondary market in your REIT. Investors looking to sell or liquidate their Hines REITs might want to investigate the following companies who are offering a secondary market for non-traded REITs:
•· REIT Secondary Exchange
•· SecondMarket
•· Pacific Partnership Group
•· Mackenzie Patterson Fuller LP
•· Central Trade and Transfer
•· Lapis Advisors LP
Please note that the Law Offices of Robert Wayne Pearce, P.A. does not recommend or endorse any of the aforementioned information exchanges. Investors are urged to do their own homework before initiating any business. If you cannot locate these companies, please call our office so that we can provide you with their contact information at no charge.
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 Hines 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 an investment in Hines Real Estate Investment Trust? 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 Hines 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.

THE HIGHLAND FLOATING RATE ADVANTAGE FUND FRAUD

If a stock brokerage firm or any of its advisors represented the Highland Floating Rate Advantage Fund (the "Highland Fund") to be a "safe" investment or an investment where you could obtain a "high level of current income, consistent with preservation of capital," then you were defrauded. The Highland Fund was anything but a safe conservative income producing investment. It was a highly speculative investment that utilized leverage to invest in "junk" bank loans. The combination of leverage with less than investment grade bank loans was a recipe for disaster. There have been too many investors complaining about how they were lulled into making unsuitable investments in the Highland Fund.
All bank loan funds are risky. But the problem with the Highland Fund was its marketing materials and the fact that its managers utilized more leverage and invested in more bank loans carrying greater risk than other bank loan funds. The Highland Fund used 25% more leverage than other bank loan funds. Generally, bank loan funds invest in loans that are rated BB or B by Standard & Poors, which is just below investment-grade. The Highland fund had twice as much of its holdings in the lower B rated loans and nearly seven times as much of its assets in the highly speculative CCC rated loans. There was no reasonable basis for characterizing the Highland fund as having an investment objective "consistent with preservation of capital" other than to mislead investors.
The Financial Industry Regulatory Authority (FINRA) has issued an Investor Alert to caution investors about the high returns promised by floating rate bank funds. FINRA is concerned and so should you be concerned about stockbrokers who downplayed the risks and emphasized the higher returns of these bank loan fund investments.
Have you suffered losses resulting from an investment in any of the Highland Funds? Those symbols are HFRCX, HFRBX, HFRAX, and HFRZX. 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 fraudulently offered and sold the Highland Fund 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.

WHY WOULD YOU WANT TO INVEST IN HEDGE FUNDS?

Warren Buffett has called hedge funds "manager compensation schemes." According to a recent article in The Economist, "Rich Managers, Poor Clients," investors pay for manager expertise, but controlling costs is a better way of having a successful investment than betting on a manager's track record. Some hedge funds charge performance fees of 20% of the gains plus another fixed 2-3% management fee regardless of whether the fund is profitable - a total of 22% in fees. In other words, the hedge fund would have to gain over 22% for investors just to breakeven. The only way to achieve those types of returns is to take extraordinary risk with your investment capital. As The Economist article stated: "It is easy to think of people who have become billionaire's by managing these hedge funds; it is far harder to think of any of their clients who have got as rich."
It is not only the costs associated with hedge funds that trouble me. The reality is they have performed poorly over the last 10 years, while they have made hedge fund managers very wealthy. As measured by the HFRX Indices (widely used benchmarks for hedge fund performance), hedge funds returned just 3% in 2012 compared to an 18% return of the S & P 500 stock Index. The major problem all hedge funds suffer these days is that they have attracted so much money that they cannot invest as they did in the past. There are too many dollars chasing too few market opportunities. And now, hedge funds are "going retail" and becoming widely available to small investors in Funds of Funds and becoming embedded in variable annuities, pension funds, endowments, foundations and other retirement plans. There are nearly 8000 hedge funds on the market and more coming online every day.
The biggest problem we have with hedge funds is a lack of transparency and the lack of due diligence that many brokers perform prior to offering and selling these investments to their biggest and best clients. The complexity and lack of transparency of hedge funds makes them the vehicle of choice for fraudsters. The United States Securities and Exchange Commission (SEC) has become especially concerned and set up a special unit "The Market Abuse Unit" to investigate the problems and abuses in the hedge fund industry. The SEC and the attorneys at our law firm are concerned about unregistered investment advisers engaging in general solicitations to unaccredited investors to put their capital in unregistered hedge funds. Too many retired, income-oriented investors, in search of higher yields have been misled into a number of hedge fund frauds such as the MAT/ASTA funds offered by Smith Barney and Citibank advisers.
Have you suffered losses resulting from an investment in any hedge fund? 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 hedge fund salespersons who fraudulently offered and sold the fund 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.

SENIOR INVESTORS MUST PROCEED WITH CAUTION WHEN USING SOCIAL MEDIA IN MAKING INVESTMENTS

Whether it is to keep in touch with distant family members, or to keep up with the latest news, elderly Americans are beginning to use social media on a daily basis. This daily activity has also steered many senior investors to use social media to help make investment decisions. Web-based platforms that allow interactive communication, such as Facebook, YouTube, Twitter, LinkedIn, bulletin boards, and chat rooms, have become an important investment tool for researching particular stocks, investigating a financial professional's background, gathering up-to-date news on a company, or to discuss the markets with other investors. Although social media can provide many benefits, it also presents opportunities for fraudsters targeting senior investors. As a result, seniors need to proceed with caution when using social media in making their investment decisions.
The key to avoiding investment scams on the internet is to be an educated investor. Below are four tips to help senior investors avoid securities fraud:
•1) Look out for "Red Flags" - Whenever an investment touts "incredible gains" or "breakout stock pick," consider it to be a hallmark of extreme risk or outright fraud. Also, do not believe a promise of guaranteed returns with "no risk." Every investment entails some risk, which is reflected in the rate of return you can expect to receive. Moreover, you should carefully examine any unsolicited offer to invest outside the United States. Many fraudsters set up offshore operations to evade supervision by regulators. Last, do not be pressured into buying an investment before you have a chance to think about the opportunity, even if it is "once in a lifetime."
•2) Look out for "Affinity Fraud" - An investment pitch made through an online group of which you are a member may be an affinity fraud. Affinity fraud refers to investment scams that prey upon members of identifiable groups, often senior, religious, or ethnic communities, professional groups, or a combination of such groups. Even if you know the person, be sure to conduct a thorough investigation, no matter how trustworthy the presenter seems to be.
•3) Be Thoughtful about Privacy and Security Settings - Seniors who use social media as a tool for investing should be mindful of the various features on these websites that can help protect privacy. You must understand that unless you guard personal information, it may be available not only to your friends, but for anyone with access to the internet, including fraudsters.
•4) Ask Questions and Check out the Answers - Never judge a person's integrity, or the merits of an investment, without doing thorough research on both the person selling the investment and the investment itself. Investigate the investment thoroughly and check every statement you are told about the investment. You can use the SEC's EDGAR filing system to investigate investments, FINRA's BrokerCheck to check registered brokers, and registered investment advisers at the SEC's Investment Adviser Public Disclosure website.
In addition, some financial professionals are using social media to attract new clients. These financial professionals may use designations such as "senior specialist" or "retirement advisor" to imply that they are experts at helping seniors with financial issues. Therefore, investors are encouraged to always look beyond a financial professional's designation and determine whether he or she can provide the type of financial services or products needed. Investors should thoroughly evaluate the background of anyone with whom he or she intends to do business before handing over hard-earned cash.
Have you suffered losses resulting from an investment offering through a web-based social media platform? 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.

MORGAN STANLEY AGREES TO PAY $5 MILLION FOR WITHHOLDING INFORMATION RELATED TO FACEBOOK IPO

Morgan Stanley has agreed to pay a $5 million fine to settle charges by the State of Massachusetts for its role in the Facebook initial public offering (IPO). Massachusetts regulators claimed that a senior investment banker at Morgan Stanley helped Facebook officials update analysts about lower revenue forecasts during private calls on May 9, 2012 - information not given to investors. Massachusetts claims that the investment banker drafted a script used by Facebook's treasurer while the phone calls were made to analysts only minutes after filing an update with the Securities and Exchange Commission (SEC). The script said that revenues for the second quarter would be "on the lower end of our 1.1 to 1.2 [billion dollar] range" and "over the next six to nine months could be 3% to 3.5% off the 2012 $5 billion target," stated the consent order. Both of these specific targets were not mentioned in the SEC filing. In addition, the consent order alleged failure to supervise analysts under the 2003 global research analyst settlement.
An IPO is a type of offering where shares of stock in a private company are sold to the general public on a securities exchange for the first time. Initial public offerings are used by companies to raise capital and to become publicly traded enterprises. A company selling shares is never required to repay the capital to its public investors. After the IPO, when shares trade freely in the open market, money passes between public investors. Although an IPO offers many advantages, there are also significant disadvantages such as the costs associated with the requirement to disclose certain information that could prove helpful to competitors, or create difficulties with vendors. Details of the proposed offering are disclosed to potential purchasers in the form of a lengthy document known as a prospectus. Most companies undertaking an IPO do so with the assistance of an investment banking firm acting in the capacity of an underwriter. Underwriters provide a valuable service, which includes help with correctly assessing the value of shares and establishing a public market for shares.
Regardless of the revenue downgrades, the price and quantity of Facebook's IPO were pushed up by bullish investors who were ignorant of the downgrades. The company went public on May 18, 2012 at $45 per share, but shares immediately sold off to settle around $38 per share. Facebook shares fell further, touching the $17 dollar range after the bad news was digested in the marketplace.
Have you suffered losses on your purchase of Facebook IPO shares? 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.

INVESTORS NATIONWIDE BEWARE - EXCHANGE-TRADED NOTES CARRY UNPLEASANT SURPRISES!

The Financial Industry Regulatory Authority (FINRA) has recently raised concerns about disclosure and sales practices involving Exchange Traded Notes (ETNs). Of primary concern is the number of clients not suited for the risks associated with ETNs, but who still were recommended ETNs by their brokers. As a result, FINRA has issued a regulatory notice to provide broker-dealers with guidance on how to oversee the sale of complex products such as ETNs that are difficult for retail investors and brokers to understand. Firms are now required to make sure that their marketing materials fairly disclose risks, and that supervisors and registered representatives are trained to understand the risks associated with ETNs. FINRA also warned that ETNs have little or no performance history, their investment indexes and investment strategies are complex, their returns have the potential to be volatile, and the price given by the issuer can vary significantly from the price on the secondary market.
ETNs are a type of debt security that trade on exchanges and offer a return linked to a market index or other benchmark. Unlike exchange traded funds (ETFs), ETNs do not buy or hold assets to duplicate the performance of the underlying index - some of the indexes and investment strategies used by ETNs can be complex and without much performance history. The return on an ETN generally depends on price changes if the ETN is sold prior to maturity, as with stocks or ETFs, or on the payment of a distribution if the ETN is held to maturity. An ETN's closing value is calculated by the issuer and is distinct from an ETN's market price, which is the price at which an ETN trades in the secondary market. Investors should understand that an ETN's market price can significantly deviate from its indicative value. Therefore, investors should avoid buying ETNs that are trading at a premium to its closing or intraday indicative value.
Investors should keep the following risks associated with ETNs before making an investment decision:
-Credit Risk: ETNs are unsecured debt obligations of the issuer.
-Market Risk: As an index's value changes with market forces, so will the value of the ETN in general, which can result in a loss of principal to investors.
-Liquidity Risk: Even though ETNs are exchange-traded, a trading market may not develop.
-Price-Tracking Risk: Investors should be wary of buying at a price that varies significantly from closing and intraday indicative values.
-Holding-Period Risk: Some leveraged, inverse and inverse leveraged ETNs are designed to be short-term trading tools, and the performance of these products over long periods can differ significantly from the stated multiple of the performance of the underlying index or benchmark during the same period.
-Call, Early Redemption, and Acceleration Risk: Some ETNs are callable at the issuer's discretion.
-Conflicts of Interest: The issuer of the notes may engage in trading activities that are at odds with investors who hold the notes - shorting strategies, for example.
Have you suffered losses resulting from exchange-traded notes recommended by your broker? 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.

INVESTORS NATIONWIDE BEWARE - BROKER-DEALER SELF-OFFERINGS ARE RISKY INVESTMENTS!

Broker-dealers oftentimes use broker-dealer self-offerings (BDOs) to raise capital by selling their own or an affiliate's securities. Typically BDO offerings come in the form of registered public offerings or private placements. Even though BDOs can be a legitimate investment, potential for abuses still exist. Prior actions have been brought against broker-dealers and financial advisors that have sold more than $36 million in BDOs to clients that involved fraud or other serious misconduct - numerous cases involved high pressure sale tactics targeting elderly or retired investors. Thus, investors are encouraged to consider the risks associated with investing in BDOs and the possibility of fraud or other misconduct before buying their broker.
When an investor purchases a private BDO, they are investing in the brokerage firm itself. Money raised in a BDO offering is usually used to finance a brokerage firm's operations. Therefore, the investor shares the risks that business will be unprofitable in the near future. The Securities and Exchange Commission (SEC) places limitations on the way private BDOs can be sold to investors. For example, brokerage firms are not permitted to advertise the BDO, and the number of small investors to whom the securities can be offered is limited in number. The BDO securities sold are not registered with the SEC or filed with FINRA, and they are not publicly traded. Consequently, private BDOs are subject to fewer disclosure requirements and regulations than registered public offerings. Private BDOs are also highly illiquid investments.
Investing in a private BDO can involve significant risks, especially when a private BDO has been announced through emails or cold calling, which may be a clear sign of a fraudulent offering. Investors can avoid the risks associated with investing in BDOs by considering a few very important points. First, the offering may be illegal if the brokerage firm did not register the BDO with the SEC, which means it was not subject to a Regulation D exemption. To meet the Regulation D exemption, the BDO cannot be advertised to the general public. Second, the reason that a brokerage firm is conducting a private BDO is because the firm is not a public company. So, there is no guarantee when, or even if, there will be a public market for the securities. Even if a company goes public through an initial public offering (IPO), federal and state laws often require that unregistered or private securities acquired in transactions such as BDOs be held for a year or more before they can be sold. Last, when an investor buys a private BDO, the brokerage firms is getting all the investor's money rather than just a commission. The brokerage firm might be selling the BDO to benefit from the offering in a certain way - the firm has been losing money or it needs cash reserves to meet regulatory requirements.
Investors should also consider the following red-flags:
-Cold-Calling or Spam: Brokers selling problematic private BDOs often use unsolicited telephone calls or email to sell private BDOs.
-High Pressure Sales Tactics: Dishonest brokers often use boiler room sales tactics, hounding investors to invest in BDOs/
-Initial Public Offering is Imminent: Investors should be wary of brokers who tell you that in the near future the brokerage firm will conduct an IPO, which will reap large profits once the securities are traded on the open market.
-Promises of Unusually High Returns: Brokers make optimistic price projections about future performance with no research to back up their assertions.
-Risk-free Investments: Some private BDO frauds involve promises that you cannot lose money.
Refusal to Provide Current Financial Documents on Request: Brokers should supply financial and other supporting materials upon a client's request.
Brokerage firms that use the above mentioned tactics oftentimes provide little or no supervision of their salespersons. Such firms may materially misrepresent experience and financial soundness of the company to attract investors. Firms will also go as far as omitting information about disciplinary actions against the firm or individuals associated with the firm.
Have you suffered losses in a broker-dealer self-offering? 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.

WAS FLORIDA BROKER DONALD HORRAS RUN OUT OF MORGAN STANLEY?

On November 8, 2012, stockbroker Donald Horras of Morgan Stanley Smith Barney transferred employment to Raymond James and Associates. Our law office is conducting an investigation and wants to know whether he was run out of Morgan Stanley or truly terminated his employment voluntarily? During the course of Mr. Horras career he was the subject of at least 7 customer complaints and one regulatory investigation. The customer complaints were generally made by elderly customers who claimed he made unsuitable recommendations of variable annuities that cause them significant losses to their retirement funds.
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. Most variable annuities do not have principal protection, so investors can lose money if markets deteriorate.
The Law Offices of Robert Wayne Pearce P.A. is currently investigating Donald Horras' acts and omissions at Morgan Stanley Smith Barney and would be interested in speaking with anyone with the truth about Mr. Horras' sudden departure from that brokerage firm.
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.

INVESTORS NATIONWIDE BEWARE OF PUMP AND DUMP SCHEMES

Self-styled stock research firms send out emails almost daily in hope of convincing their recipients to invest in exciting new businesses. Typically, these companies are close to developing cures for cancer or HIV, have discovered gold deposits, or have developed cutting-edge internet technology. While these opportunities might seem intriguing, many of these research firms are more interested in making money from selling stock to investors without any experience than they are about capitalizing new businesses. What is usually occurring is an effort to pump up a stock price through an intense marketing campaign so that schemer stock holdings can be dumped on new investors when the share price peaks. Hence the name, "pump and dump."

A pump and dump scheme is a form of stock fraud that involves artificially inflating the price of an owned stock through false and misleading positive statements. The objective is to sell the cheaply purchased stock at a higher price by driving up the value via new client stock purchases. They are usually conducted with the aid of one or more small broker-dealers who cold-call small investors from lead-lists and use high pressure sales tactics. Oftentimes, the brokers engage in unauthorized trading and refuse to execute all orders to pump up the stock price. Once the operators of the scheme pump up the price and dump their overvalued shares, the price falls and investors lose their money. While fraudsters in the past relied on cold calls, the internet now offers a cheaper and easier way of reaching large numbers of potential investors.

Fortunately, investors can spot pump and dump schemes by asking themselves a series of simple questions. The following will help eliminate most stocks that do not have real business:

1) What is the current stock price?

Check the recent stock price by getting a quote on the internet. Most worthwhile stock prices trade at around $5 per share. If you are a conservative investor or not risk tolerant, rule out stocks trading below that level.

2) How has the stock traded recently?

Heavily promoted stocks often move from below 50 cents to above $1 or more in a short period of time. Rule out stocks that have consistently traded below 50 cents per share.

3) What are the company's annual revenues?

Use the internet to look up the company's income statement. Rule out companies that do not produce at least $50 million in revenue per year.

4) What are the quarterly revenues?

Use the internet to look up the company's quarterly income. Rule out companies that do not produce at least $10 million in revenue per quarter.

5) Is the company solvent?

Use the internet to look up the company's balance sheet. The liabilities exceed assets, the company is financially weak. Rule out any companies whose current liabilities exceed current assets.

6) Has there been a change in business?

Use the internet to look up the most recent Quarterly 10-Q or Annual 10-K report and read the Overview section. Rule out any company that has recently changed its business plan, i.e. from mining to technology.

Investors should still realize that passing any one of these question does not necessarily mean that they will make money. At the least, they will know they are considering a real company.

Have you suffered losses in a pump and dump scheme? 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.

HEDGE FUND INVESTORS NATIONWIDE BEWARE - YOU MAY NOT BE GETTING THE WHOLE TRUTH!

Hedge fund investors do not receive all the federal and state law protections that typically apply to mutual fund investments. For example, hedge funds are not required to provide the same level of disclosure as one would receive if investing in mutual funds. This poses a serious concern for investors because it can be more difficult to evaluate the terms of an investment in a hedge fund. In addition, it may also be difficult to verify the representations an investor receives from the hedge fund. The Securities and Exchange Commission (SEC) has brought numerous actions against hedge funds and their managers for defrauding investors. Some examples include actions for managers misrepresenting their experience and track record, Ponzi schemes, and phony account statements to cover up losses and stolen cash. That is why it is extremely important to thoroughly check every aspect of any hedge fund one might consider investing in.
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 the funds under management.
Investors interested in hedge funds can safeguard themselves from abuses and monetary losses by taking the following actions: 1) read a fund's offering memorandum and related materials to determine its investment strategy, the geographical location, fees earned by the manager, expenses charged by the manager, and any conflicts of interest that may exist; 2) understand the level of risk taken by the hedge fund and determine whether it is suitable; 3) determine if the fund is using leverage or other speculative investment techniques; 4) understand the fund's valuation process in case the fund is investing in highly illiquid securities; 5) understand how the fund's performance is determined; 6) understand any limitations on rights of redemption; and 7) research the backgrounds of the hedge fund managers. These simple investigations will help to shed light on whether a hedge fund is suitable for an inexperienced hedge fund investor, who should certainly employ every available measure in order to avoid losing his or her hard earned money.
Have you suffered significant losses in a hedge fund? 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.

INVESTORS NATIONWIDE BEWARE OF COVINGTON TENANT-IN-COMMON INVESTMENTS

Broker-dealers are at the forefront of an ongoing investigation into Covington tenant-in-common investments (TICs). This is attributable to the broker-dealers' failure to conduct adequate due diligence prior to offering and selling the TIC investment to their clients. Therefore, brokers misrepresented the product as a safe and guaranteed investment, with returns ranging from 7 to 12%. The results were hefty commissions for brokers, while clients were left with unsuitable and risky real estate investments in the midst of a property bubble.

TICs are investment vehicles that allow individual investors to buy shares of real estate interests directly, rather than shares of stock, bond certificates, or other forms ownership. Properties can include a high-rise office building, a retail center, a triple-net lease from a national drugstore chain, oil or gas wells, or any other type of investment property. Investors are attracted to TICs because they can purchase an interest in expensive properties - typically $30 million or more in value. Over the past decade, TICs have become popular among retail investors. This is partially attributable to the IRS' rule amendment, which allows investors to avoid capital gains taxes by investing property sale proceeds into TICs.

Due diligence requires a reasonable investigation of all material facts before entering into an agreement or transaction with another person or entity. It is a measure taken to prevent unnecessary harm to an innocent party. In many instances, broker-dealers do not perform sufficient due diligence prior to offering products such as tenant-in-common investments. If broker-dealers do not perform their due diligence, they risk misrepresenting the true nature of the product and placing clients in an unsuitable investment. As a result, an investor can claim damages against the broker-dealer that sold the Covington TIC for not performing its due diligence prior to the offer and sale.

Have you suffered a loss in a Covington tenant-in-common investment? 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.

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.

CAN I RECOVER MY COLE REAL ESTATE INVESTMENT TRUST LOSSES?

Many investors in the non-traded Cole REITs have inquired about their ability to recover their losses after learning that their fund is no longer valued as much as they were previously led to believe. As a result, many claims are being filed by Cole REIT and other REIT investors for misrepresentation, unsuitable recommendations and/or overconcentrations of their investment funds in Cole REIT and other REIT investments to recover their REIT losses.

At first blush, one may think that the best claim is against the Cole REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Cole REIT and other REIT investments were recommended by your brokerage firm and financial advisor who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.

The most common misrepresentation and misleading statement claims that the Cole REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that Cole REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in Cole REIT and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are a Cole REIT investor with the same complaints, we believe we can help you recover your REIT 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.

THE SEC CHARGES FORMER JP TURNER COMPANY BROKER RALPH CALABRO FOR CHURNING CLIENT ACCOUNTS

The Securities and Exchange Commission (SEC) has charged former JP Turner and Company broker Ralph Calabro for churning client accounts with conservative investment objectives. Mr. Calabro's churning activity caused severe losses for clients, while he collected hefty fees. He served as a registered representative of the Parlin, NJ branch office from March 2004 until January 2007, and he is currently a registered representative at National Securities Corp.

Churning is a fraudulent practice in which brokers ignore their clients' investment objectives and engage in excessive trading for the purpose of generating commissions. The SEC alleged that between January 2008 and December 2009, Mr. Calabro churned three client accounts, which suffered approximate losses of $2.3 million. The SEC said that the trading in the accounts were excessive in light of Mr. Calabro's customers' objectives, experience, age, and needs. Mr. Calabro split commissions, fees, and margin interest totaling $845,000.00 with two other brokers accused by the SEC for churning client accounts at JP Turner. An administrative proceeding by the SEC against Mr. Calabro is currently pending.

Broker-dealers must establish and implement a reasonable supervisory system to protect customers from churning and similar abuses. If broker-dealers do not establish a reasonable supervisory system, they may be liable to investors for damages. In the case of JP Turner, the SEC found that adequate procedures were not implemented to detect and prevent churning. Therefore, investors who have suffered damages can bring forth claims to recover losses against JP Turner due to Mr. Calabro's churning.

Have you suffered losses as a result of Ralph Calabro's churning? Did you have an actively traded account with Mr. Calabro that the SEC did not review? 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.

LOVE FOR SALE BY RODMAN AND RENSHAW ANALYST LEWIS BOREAS FAN

Research analysts offering a buy rating in exchange for investment banking business has suddenly resurrected after a long dormant period dating back to the dot-com boom. According to FINRA, Rodman and Renshaw LLC analyst Lewis Boreas Fan offered to initiate research coverage in exchange for investment banking business after Mr. Fan was assigned to cover Chinese companies. Contrary to FINRA's allegations, email evidence suggests that Mr. Fan was not seeking investment banking business, but was only seeking to be loved by a Chinese manufacturer of mineral based, heat resistant products. However, FINRA quotes emails that Mr. Fan sent to Rodman's CEO, which includes one that allegedly contains code words to conceal the improper conduct.
According to NASD Rule 2711, it is unlawful for a research analyst to initiate efforts to solicit investment banking business. Rule 2711 is one of the new prohibitions issued after the dot-com crash, which was partially due to the failure to regulate research analysts. The regulatory problem addressed by Rule 2711 is as follows: broker-dealers employ research analysts who cover companies. These analysts study a company's financial statements and issue reports that typically include a buy, sell, or hold recommendation - sometimes market outperform, market perform, or neutral. At the same time, broker-dealers offer investment banking services, which include lucrative engagements to assist companies with IPOs and other securities offerings to investors. Broker-dealers then use their research departments to help generate banking business. An example would be a broker-dealer offering to initiate research coverage of a new company that was not currently covered in exchange for the company's investment banking business, or the broker-dealer agreeing to maintain a buy-rating on the stock.
One notable instance is the Global Analyst Research Settlements of 2003, in which ten large broker-dealers agreed to pay penalties and disgorgement totaling $875 million. Also caught up were Jack Grubman and Henry Blodget, who were barred from the industry and paid $15 million and $4 million respectively for issuing positive reports that were inconsistent with their negative internal views just to keep the companies and investment bankers happy. As a result of this form conduct, broker-dealers were encumbered with Rule 2711 in order to prevent research analysts from being chosen by investment bankers. The rule also contains sections that prohibit investment bankers from strong-arming research analysts. This section prevents investment bankers from retaliating or threatening to retaliate against any research analyst because of an adverse, negative, or otherwise unfavorable research report or public statement.
As for Mr. Fan, the following is the email message about a Chinese company he sent to Rodman's CEO:
"I have just reached out to the management. Here is where things stand. As of right now, they want to divide their love into two: 10 dollars of popcorn for us and 10 dollars of soda for the other guy, on two separate movie dates. But the other guy is providing much better accommodation to them than we are. The management is particularly upset that we are imposing much stricter criteria to them than we did to [another company], such as a divorce settlement. They feel it's discriminatory and they feel insulted. In fact, our love was so tough that their CEO was leaning towards giving his whole love to the other guy. But the other members of the management have persuaded him to share his love. But their opinion is: if we want to even have 50 percent of the love, we've got to sweeten the pot, as the other guy is really showing them a lot of love."
Whether or not the email contains codes referring to investment banking is for you to decide. However, keep in mind that after this email, Mr. Fan initiated coverage of the Chinese company with a market outperform rating. Thereafter, the company announced a $10 million registered direct offering for which Rodman was the exclusive placement agent. To settle the case, Mr. Fan agreed to pay a $10,000.00 fine and serve a 30-day suspension, while Rodman agreed to pay a $315,000.00 fine and hire an independent consultant to straighten up its analyst compliance.
Unfortunately, the Rodman episode is not the only analyst incident to recently occur. Alka Singh, another research analyst, found herself disappointed when a company she initiated coverage on filed to reciprocate with investment banking business. Bound and determined to get paid, Ms. Singh sent the covered company's CEO an email requesting a direct payment for having covered the company. In the email, Ms. Singh advised the company that in such situations, companies have concealed the fees as a consulting fee or banking fee so that the analyst can get something for their effort.
Have you suffered losses resulting from bogus research conducted by an analyst? 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.

FLORIDA INVESTORS BEWARE OF VIATICAL SETTLEMENT INVESTMENT SCAMS

Florida attorney Michael McNerney has reached a settlement with the Securities and Exchange Commission (SEC) for being involved in a viatical settlement scam that defrauded investors out of $1 billion. Mr. McNerney, who was outside counsel to Mutual Benefits Corp., has been restrained by the SEC from future securities activity and ordered to pay $826 million in restitution along with other convicted defendants. He was also sentenced to time in prison for conspiracy to commit securities fraud.

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.

Mutual Benefits Corp. was accused of marketing viatical settlements as safe and secure investments through its sales agents and marketing materials. Other allegations include acquiring policies that could not be purchased or sold, improperly managing escrow funds, and pressuring doctors to approve false life expectancy figures.

Selling away is one available theory of liability in a viatical settlement scam case. Selling away is the inappropriate practice of an investment professional who sells or solicits securities or investments not held or approved by the brokerage firm with which the professional is associated with. Under NASD and FINRA rules, brokerage firms must approve investments offered by their investment professionals and supervise its sales. Viatical settlements are rarely approved as authorized investments at broker-dealers, and broker-dealers can be held liable for its salesmen's activities because it either failed to establish a reasonable supervisory system, or because it failed to implement an existing reasonable supervisory system. Even if the broker dealer did not know of Mr. the investment professional's activities, it can still be liable to investors for damages.

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.