MERRILL LYNCH SUBPOENAED BY MASSACHUSETTS REGULATORS OVER SALES OF ALTERNATIVE INVESTMENTS TO SENIORS

Merrill Lynch was subpoenaed by Massachusetts in connection with a sweep investigation, which is looking into sales practices involving alternative investments sold to seniors. Merrill Lynch's principal office is located in New York, New York. On July 10, 2013, the state's securities division sent the subpoena to Merrill Lynch asking for information on sales of the products to state residents who are 65 or over. Some of the non-traditional investments include oil and gas partnerships, private placements, structured products, hedge funds, and tenant-in-common offerings. The state demanded information from Merrill Lynch on any such products that have been sold over the past year, the investors who purchased them, the commissions generated, how the sales were reviewed, and all relevant compliance, training and marketing materials - Merrill Lynch has until July 24 to respond. The state added that being on the list of targeted firms does not indicate wrongdoing.

Although non-traded REITs were not part of the information request, Massachusetts has expressed its heightened concern "that the senior marketplace is being targeted for the sales of these high-risk, esoteric products," Massachusetts Secretary of the Commonwealth William F. Galvin said in a statement. The state has already cracked down on a number of firms for alleged improper sales of non-traded REITs. In February 2013, the state reached a settlement with LPL Financial to pay at least $2 million in restitution and $500,000 in fines related to the sale of non-traded REITs. In May 2013, it settled REIT cases with Ameriprise Financial Services Inc., Commonwealth Financial Network, Lincoln Financial Advisors Corp., Royal Alliance Associates Inc. and Securities America Inc. The five firms agreed to pay a total of $6.1 million in restitution to investors and fines totaling $975,000.

Senior investors have become the targets of unscrupulous brokers, investment advisors and insurance agents. This is due in part to the fact that as we age, our ability to understand newer and complex investments diminishes every year. Therefore, senior retirement savings are ripe for picking and an epidemic of fraud is underway all across America. As a result many states, such as Massachusetts, have enacted laws with harsh penalties and are performing investigative sweeps to protect senior investors.

Broker-dealers have a duty to protect senior investors from broker misconduct by establishing and implementing an adequate supervisory system to oversee sales practices. If broker-dealers do not so, they may be liable to senior investors for damages flowing from an unreasonable recommendation and sale. Are you a senior investor suffering losses in your Merrill Lynch account due to an unreasonable recommendation and sale 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 Merrill Lynch 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.

WELLS FARGO AND BANK OF AMERICA FINED BY FINRA FOR UNSUITABLE SALES OF FLOATING-RATE BANK LOAN FUNDS

The Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo and Bank of America $2.15 million and ordered the firms to pay more than $3 million in restitution to customers for losses incurred from unsuitable sales of floating-rate bank loan funds. FINRA ordered Wells Fargo Advisors, LLC, as successor for Wells Fargo Investments, LLC, to pay $1.25 million and reimburse approximately $2 million in losses to 239 customers. FINRA ordered Merrill Lynch, as successor for Bank of America Investment Services, Inc., to pay $900,000 and reimburse approximately $1.1 million in losses to 214 customers. Wells Fargo and Bank of America neither admitted nor denied the charges, but consented to the entry of FINRA's findings.

Floating-rate bank loan funds are mutual funds that invest in a portfolio of secured senior loans made to entities whose credit quality is rated below investment-grade, which subjects the funds to significant default risks and illiquidity.

FINRA found that Wells Fargo and Bank of America brokers recommended floating-rate bank loan funds to customers whose risk tolerance, investment objectives, and financial conditions were inconsistent with the risks and features associated with floating-rate loan funds. The subject customers were seeking to preserve their principal or had conservative risk tolerances, but the brokers made recommendations to purchase floating-rate loan funds without having reasonable grounds to believe that the purchases were suitable for the customers. FINRA also found that the firms failed to train their sales forces regarding the unique risks and characteristics of the funds. The firms also failed to reasonably supervise the sales of floating-rate bank loan funds.

Have you suffered losses in floating-rate bank loan funds sold by Wells Fargo Advisors, Merrill Lynch, or any other broker-dealer? 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.

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.

FLORIDA MERRILL LYNCH BROKER CHARLES EUGENE BISHOP JR. FINED AND SUSPENDED FOR ATTEMPTING TO MISAPPROPRIATE $3 MILLION FROM ELDERLY CLIENT

Charles Eugene Bishop Jr. has been fined $7,500 and suspended for two years by the Financial Industry Regulatory Authority (FINRA) for attempting to misappropriate approximately $3 million from an elderly client while he was at Merrill Lynch. FINRA's findings stated that Mr. Bishop generated paperwork by which the deceased client's assets would be transferred to a purported entity that was never formed, but whose name was identical to a company the client owned, with a tax identification number assigned by the IRS to a different entity that was never formed, but whose sole member was Mr. Bishop.
In order to carry out his scheme, Mr. Bishop had the client sign a firm form that designated Mr. Bishop's entity. Even though the client's signature was notarized, the client was not present when the form was notarized by the notary. In addition, the tax identification number on another firm form the client signed was changed to the tax identification number associated with Mr. Bishop's entity. Furthermore, the findings stated that after the client passed away, Mr. Bishop filed a notice, through his attorney, with his state's probate division asserting that he had an interest in the deceased client's estate as beneficiary. The court eventually issued an order invalidating the beneficiary designations after Mr. Bishop was terminated from Merrill Lynch.
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. Therefore, investors who have suffered damages resulting from the misappropriation of their funds by their broker can bring forth claims to recover losses against their broker-dealer for failure to prevent such illegal activity.
Have you suffered damages resulting from a misappropriation of your funds 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.

BANK OF AMERICA MERRILL LYNCH HIT WITH $1.3 MILLION ARBITRATION ORDER IN FLORIDA FOR FANNIE MAE PREFERRED STOCK SALES

Bank of America Merrill Lynch has been ordered to pay a $1.3 million arbitration award to a couple whose broker, Miles Pure, sold them Fannie Mae preferred stock. Although multiple warnings of its risks were apparent, including a sell rating from Merrill Lynch's own analysts, Mr. Pure sold Robert and Michelle Billings $2.3 million in Fannie Mae preferred shares two months before Fannie Mae collapsed and was placed into conservatorship. Also, just two weeks before the Billingses purchased the shares, Moody's downgraded Fannie Mae preferred stock, and Merrill Lynch removed the shares from its recommended list due to significant concerns about the company. The Billingses ended up losing their entire investment.
A fiduciary duty is an obligation to act in the best interest of another party. A fiduciary obligation exists whenever the relationship with the client involves a special trust, confidence, and reliance on the fiduciary to exercise his discretion or expertise in acting for the client. The fiduciary must exercise all of the skill, care and diligence at his disposal when acting on behalf of the client. A person acting in a fiduciary capacity is held to a high standard of honesty and full disclosure and must not obtain a personal benefit at the expense of the client. In the case of the Billingses, FINRA found that Merrill Lynch was liable for breach of fiduciary duty and was ordered to pay compensatory damages.
The Billingses were never given any research on Fannie Mae despite their repeated requests. This prevented them from learning that Merrill Lynch had taken recent action, including recent analysts' reports, which reflected its negative view of Fannie Mae. Contrary to Mr. Pure's representations, it was Fannie Mae agency bonds and not the preferred shares that were back by the US government. The distinction was either not understood by Mr. Pure, or it was completely ignored by him in his sale of Fannie Mae shares to the Billingses.
Have you suffered losses as a result of broker misconduct? 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.

FORMER MERRILL LYNCH REGISTERED REPRESENTATIVE ADAM SPENCER DEANE SUSPENDED AND FINED FOR UNLICENSED AND FRAUDULENT SALE OF VARIABLE ANNUITY

Former Merrill Lynch registered representative Adam Spencer Deane has been fined $25,000.00 and suspended from association with any FINRA member in any capacity for three months. Mr. Deane consented to FINRA's findings that he recommended and executed a variable annuity replacement contract for a client in a state in which Deane was not licensed to sell insurance products and include false information in the firm's electronic books and records. Mr. Deane had prepared the variable annuity application in Florida and sent it to the client's residence in New York for her signature, which the client signed and sent back to Mr. Deane. Merrill Lynch determined that the annuity contract could not be honored because the variable annuity was not available to New York residents. These findings by FINRA ultimately led to the described sanctions against Mr. Deane.
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 to 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. A deferred variable annuity offers investors a way to accumulate savings and defer taxes until money is withdrawn. Variable annuities do not guarantee principal protection, so investors can lose money if markets deteriorate.
Broker-dealers must establish and implement a reasonable supervisory system to protect customers from unlicensed and fraudulent sales practices. 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. Deane and Merrill Lynch, Mr. Deane logged into Merrill Lynch's web-based system used by sales employees to complete transaction paperwork for annuity contract purchases showing that the client was resident of New York. After the system rejected the replacement transaction because the annuity could not be offered to New York residents and because Mr. Deane was not licensed in New York, Mr. Deane inputted Florida as the client's state of residence. Mr. Deane also used the system to falsely show that the client signed the annuity contract in Florida. Clearly, Merrill Lynch failed to properly supervise Mr. Deane during his plot to sell an annuity to a client in New York. Therefore, an investor who has suffered damages can bring forth claims to recover losses against Merrill Lynch for acts such as Mr. Deane's unlicensed and fraudulent sale.
Have you suffered losses in a variable annuity sold by a Merrill Lynch or any other brokerage firm? 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 FINES MERRILL LYNCH $2.8 MILLION FOR OVERCHARGING CUSTOMERS

The Financial Industry Regulatory Authority (FINRA) has fined Merrill Lynch $2.8 million for overcharging nearly 95,000 customers with fees totaling more than $32 million. The overcharges occurred from April 2003 to December 2011. The fine also included failing to provide timely trade confirmations ("Merrill Lynch Fined for Overcharging Customers," Wall Street Journal).

"Investors must be able to trust that the fees charged by their securities firm are, in fact, correct," Brad Bennett, the regulator's chief of enforcement, was quoted as saying, adding: "When this is not the case, investor confidence is threatened."

Merrill Lynch's failure to send customers trade confirmations involved more than 10.6 million trades in over 230,000 customer accounts from July 2006 to November 2010. Merrill Lynch also failed to deliver proxy and voting materials, margin risk disclosure statements and business continuity plans.

Merrill Lynch blamed improper coding of accounts for the problems, according to the article. Merrill Lynch is a division of Bank of America.

In keeping with its much-criticized practice, FINRA allowed Merrill Lynch to buy its peace without admitting to any facts.

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

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

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

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

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

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

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

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

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

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

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

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

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