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.

DEUTSCHE BANK SECURITIES CENSURED AND FINED FOR FAILURE TO DELIVER PROSPECTUSES TO INVESTORS

Deutsche Bank Securities submitted a letter of acceptance, waiver, and consent after the Financial Industry Regulatory Authority (FINRA) entered findings that the firm failed to deliver on time, or failed to ensure that its service provider delivered on time, prospectuses to customers who purchased mutual funds, when in many instances the firm's customers who should have received a prospectus within three business days of the transaction did not. FINRA also found that the firm failed to deliver preliminary IPO prospectuses to certain customers who indicated interest in initial public offerings (IPOs). Deutsche Bank Securities was censured and fined $125,000 after FINRA took into account the fact that the firm self-reported the failures to deliver preliminary IPO prospectuses, self-reported to FINRA that its Global Markets Division did not deliver preliminary IPO prospectuses to certain customers, and took remedial action to correct the non-delivery of the prospectuses.
A prospectus is a document that discloses important information about an investment. It typically provides investors with material information about mutual funds, stocks, bonds, and other investments. Such information generally includes a description of the company's business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties, and any other material information. In the case of an initial public offering (IPO), a prospectus is required to be delivered by underwriters or brokerage firms to potential investors.
Regarding the mutual fund prospectuses, FINRA's findings stated that Deutsche Bank Securities' clearing firm contracted with a third-party service for the delivery of mutual fund prospectuses for all the clearing firm's introducing brokers, including the Deutsche Bank Securities. On a daily basis, the clearing firm provided the service provider with electronic information pertaining to mutual fund transactions requiring delivery of a prospectus to the firm's customers - they also provided daily and monthly reports to Deutsche Bank Securities. The clearing firm also provided Deutsche Bank Securities with a daily report that identified late prospectus deliveries, including the number of days late and the reason for delay, but the report was never reviewed. FINRA's findings also stated that because of Deutsche Bank Securities' failure to deliver prospectuses on time to a number of customers who purchased mutual funds, these customers were not provided with important information about these products by settlement date. In addition, FIRNA's findings included that the firm failed to implement and maintain a supervisory system and written supervisory procedures (WSPs) reasonably designed to ensure that mutual fund prospectuses were being delivered on a timely basis. Deutsche Bank Securities' WSPs did not require review of the reports provided by its clearing firm that identified late prospectus deliveries and did not require firm personnel to communicate with the service provider. Instead, Deutsche Bank Securities relied upon its clearing firm to ensure the timely delivery of mutual fund prospectuses.
Regarding the IPO prospectuses, FINRA found that Deutsche Bank Securities failed to deliver preliminary IPO prospectuses to customers interested in IPOs. The main cause was the failure of employees within the firm's Global Markets Division to utilize the electronic system designed to ensure delivery of preliminary prospectuses. Because of the Deutsche Bank Securities' failure to deliver preliminary IPO prospectuses to a number of customers interested in purchasing shares in IPOs, these customers were not provided with important disclosures about these products until after they had purchased the shares. FINRA also found that Deutsche Bank Securities was required to establish and maintain a supervisory system and WSPs reasonably designed to monitor and ensure the timely delivery of IPO prospectuses. The Deutsche Bank Securities' systems and procedures were not reasonably designed to ensure that preliminary IPO prospectuses were being delivered to every customer, and therefore failed to implement and maintain such a supervisory system and WSPs.
Have you suffered losses in your Deutsche Bank Securities brokerage account? 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 Deutsche Bank Securities 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.

WAS THE OPPENHEIMER GLOBAL RESOURCE PRIVATE EQUITY FUND, L. P. MISREPRESENTED?

The Oppenheimer Global Resource Private Equity Fund, L.P. (the "Global Resources Fund") was launched by Oppenheimer Holdings, Inc. (Oppenheimer) in April 2008. Oppenheimer raised over $200 million for the Global Resources Fund from investors throughout the United States. Over the life of the fund, Oppenheimer has reported valuations and performance to existing and new investors. The question recently raised by the United States Securities and Exchange Commission (SEC) is whether Oppenheimer misrepresented the valuation and performance of the Global Resources Fund to retain old investors, to avoid lawsuits, and attract new investors. The SEC and Massachusetts Attorney General's office have been actively investigating Oppenheimer and the Global Resources Fund.
It has been reported that the investigation of Oppenheimer is focused on its overvaluation of a single holding within the Global Resource Fund. Apparently, the overvaluation transforms the fund's actual loss of 6.3% in 2009 into a profit of over 38%. If that is what Oppenheimer did, then the overstatement is nothing short of a gross misrepresentation of the fund's performance.
During the relevant period, Oppenheimer continued to market and sell investments in the Global Resource Fund. It appears that Oppenheimer raised an additional $55 million from investors with false and misleading information during the same period. If true, investors relying on the false and misleading performance information would have a good claim for fraudulent misrepresentations and omissions, breach of fiduciary duty, negligence and breach of contract.
Have you suffered losses resulting from an investment in the Global Resources 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 Oppenheimer and it's stockbrokers 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.

T. ROWE PRICE FINED FOR FAILURE TO DELIVER PROSPECTUSES TO INVESTORS

T. Rowe Price Investment Services, Inc. (T. Rowe Price) has been fined by the Financial Industry Regulatory Authority (FINRA) for violation of securities industry rules and regulations relating to the protection of investors. T. Rowe Price failed to implement and maintain adequate supervisory systems and procedures to monitor and ensure the timely delivery of mutual fund prospectuses as required by Section 5 of the Securities Act of 1933 (the "Securities Act"), NASD Conduct Rule 3010 and FINRA Rule 2010. FINRA investigators discovered that T. Rowe Price failed to provide prospectuses to its customers who purchased mutual funds and other securities products during the period of its investigation - 2009 through 2011 (the "relevant period"). FINRA estimated that T. Rowe Price may have failed to deliver at least 2,500 prospectuses to its customers in a timely manner during that period.
The federal and state securities laws require the delivery of a prospectus to investors because it provides them with important information about the product being purchased. Our federal and state securities laws require disclosure of the details of the enterprise in which an investor's putting money so that he can be fully apprised and can intelligently appraise the risks involved in his or her particular investment. Not only has T. Rowe Price violated the Section 5 of the Securities Act, but it has also violated Section 10 (b) of the Securities Exchange Acts of 1934 (the "Exchange Act"), which states the time a prospectus must be delivered. A prospectus is required to be delivered by securities broker-dealer before the transaction is complete on the settlement date of the transaction, which in the case of mutual fund transactions and most stock transactions is no later than 3 business days after the order is placed.
The failure to deliver prospectuses in a timely manner is an extremely serious violation. It is not only a violation that can result in sanctions by securities regulator such as FINRA, but it can also give rise to a civil action or arbitration claim by an investor for rescission (to unwind the transaction) under both federal and state securities laws. Alternatively, an investor may recover damages for losses suffered in connection with an investment he or she made through T. Rowe Price if that investor did not receive a prospectus in a timely manner.
Have you suffered losses resulting from a T. Rowe Price stockbroker's failure to deliver a prospectus relating to an investment made through that 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.

STATE FARM VP MANAGEMENT CORP. FINED FOR FAILURE TO DELIVER PROSPECTUSES TO INVESTORS

State Farm VP Management Corp. (State Farm) has been fined by the Financial Industry Regulatory Authority (FINRA) for violation of securities industry rules and regulations relating to the protection of investors. State Farm failed to implement and maintain adequate supervisory systems and procedures to monitor and ensure the timely delivery of mutual fund prospectuses as required by Section 5 of the Securities Act of 1933 (the "Securities Act"), NASD Conduct Rule 3010 and FINRA Rule 2010. FINRA investigators discovered that State Farm failed to provide prospectuses to its customers who purchased mutual funds and other securities products during the period of its investigation - 2009 through 2011 (the "relevant period"). FINRA estimated that State Farm may have failed to deliver at least 150,000 prospectuses to its customers in a timely manner during that period. Further, FINRA investigators found that State Farm failed to send updated prospectuses, which is also required under the law and industry rules to thousands of investors from 2001 through 2012.
The federal and state securities laws require the delivery of a prospectus to investors because it provides them with important information about the product being purchased. Our federal and state securities laws require disclosure of the details of the enterprise in which an investor's putting money so that he can be fully apprised and can intelligently appraise the risks involved in his or her particular investment. Not only has State Farm violated Section 5 of the Securities Act but it has also violated Section 10 (b) of the Securities Exchange Acts of 1934 (the "Exchange Act"), which states the time a prospectus must be delivered. A prospectus is required to be delivered by securities broker-dealer before the transaction is complete on the settlement date of the transaction, which in the case of mutual fund transactions and most stock transactions is no later than 3 business days after the order is placed.
The failure to deliver prospectuses in a timely manner is an extremely serious violation. It is not only a violation that can result in sanctions by securities regulators such as FINRA, but it can also give rise to a civil action or arbitration claim by an investor for rescission (to unwind the transaction) under both federal and state securities laws. Alternatively, an investor may recover damages for losses suffered in connection with an investment he or she made through State Farm if that investor did not receive a prospectus in a timely manner.
Have you suffered losses resulting from a State Farm stockbroker's failure to deliver a prospectus relating to an investment made through that 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.

DEUTSCHE BANK SECURITIES INC. FINED FOR FAILURE TO DELIVER PROSPECTUSES TO INVESTORS

Deutsche Bank Securities Inc. (DBSI) has been fined by the Financial Industry Regulatory Authority (FINRA) for violation of securities industry rules and regulations relating to the protection of investors. DBSI failed to implement and maintain adequate supervisory systems and procedures to monitor and ensure the timely delivery of mutual fund prospectuses as required by Section 5 of the Securities Act of 1933 (the "Securities Act"), NASD Conduct Rule 3010 and FINRA Rule 2010. FINRA investigators discovered that DBSI failed to provide prospectuses to its customers who purchased mutual funds and other securities products during the period of its investigation - 2009 through 2011 (the "relevant period"). FINRA estimated that DBSI may have failed to deliver at least 75,000 prospectuses to its customers in a timely manner during that period.
The federal and state securities laws require the delivery of a prospectus to investors because it provides them with important information about the product being purchased. Our federal and state securities laws require disclosure of the details of the enterprise in which an investor's putting money so that he can be fully apprised and can intelligently appraise the risks involved in his or her particular investment. Not only has DBSI violated the Section 5 of the Securities Act, but it has also violated Section 10 (b) of the Securities Exchange Acts of 1934 (the "Exchange Act"), which states the time prospectus must be delivered. A prospectus is required to be delivered by a securities broker-dealer before the transaction is complete on the settlement date of the transaction, which in the case of mutual fund, other initial public offering (IPO) transactions and most stock transactions is no later than 3 business days after the order is placed.
The failure to deliver prospectuses in a timely manner is an extremely serious violation. It is not only a violation that can result in sanctions by securities regulator such as FINRA, but it can also give rise to a civil action or arbitration claim by an investor for rescission (to unwind the transaction) under both federal and state securities laws. Alternatively, an investor may recover damages for losses suffered in connection with an investment he or she made through DBSI if that investor did not receive a prospectus in a timely manner.
Have you suffered losses resulting from a DBSI stockbroker's failure to deliver a prospectus relating to an investment made through that 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.

INVESTORS NATIONWIDE BEWARE - THE PROTECTION IN PRINCIPAL PROTECTED FUNDS HAS ITS PRICE!

In recent bear markets investors were more worried about the return of their principal than about a return on their principal. Broker-dealers and investment banks responded by marketing new types of mutual funds that guarantee, for a limited period of time, the capital invested - for a price, of course. These products are known as principal protected funds. Before investing in principal protected funds, investors ought to understand their characteristics and make sure that their broker has made a suitable recommendation.
Principal protected funds have several characteristics that every investor should understand. First, most principal protected funds guarantee the invested amount less any front-end sales charge even if the stock market falls. In many cases, the guarantee is backed by an insurance policy. Second, if the investor decides to sell any shares in the fund prior to the end of the guarantee period, usually five to ten years, the investor will lose the guarantee on those shares and could lose money if the share price has fallen since the initial investment. Third, most principal protected funds invest a portion of the fund in debt securities and a portion in stocks and other equity investments during the guarantee period. To make sure the fund can support the guarantee, many funds will hold zero-coupon bonds or other debt securities when interest rates are low and markets are volatile, which can greatly reduce any potential gains from a subsequent rise in the stock market. This allocation may also increase the risk of rising interest, which causes bond values to drop. Last, many principal protected funds carry an expense ratio that is higher than that of non-protected funds. Fees range from 1.5 percent to nearly 2 percent, of which .33 percent to .75 percent typically pays for the principal guarantee. In addition, many funds impose sales charges and redemption fees or penalties for early withdrawals.
Before investing in principal protected funds, investors should read the prospectus and keep the following points in mind:
-Do I need the money in the next 5 to 10 years? If you liquidate an investment in a principal protected fund early, you may lose your principal guarantee and have to pay an early withdrawal penalty.
-Do I need income from the investment? The guarantee is based on taking no redemptions during the guarantee period and reinvesting all dividends and distributions.
-Unless held in a tax-deferred retirement account such as an IRA, you must pay U.S. income tax yearly on the imputed interest from the fund's zero coupon bond holdings as it accrues.
-In certain market conditions, the fund may be invested in zero-coupon bonds and other debt securities forfeiting all potential gains if the stock market rises.
-If the fund achieves no gains above your initial investment, your performance would trail that of US Treasury bonds purchased with no annual fees.
-The benefit of the guarantee is only valid on the funds maturity date. If you sell your shares before or after the maturity date, you could lose money if share prices have fallen.
-The guarantee the fund provides is only as good as the company backing it. Interested investors should investigate the company's financial strength by verifying with several credit rating agencies - information can be found on the Securities and Exchange Commission (SEC) website.
Have you suffered losses in your portfolio due to an investment in a principal-protected 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.

MUTUAL FUNDS INVESTORS NATIONWIDE MIGHT BE ENTITLED TO BREAKPOINT DISCOUNTS THEY NEVER RECEIVED

Investors nationwide might be eligible for a refund of the front-end sales charge they paid when they purchased Class A shares of a mutual fund from their respective securities firms. An industry-wide survey taken showed that investors did not receive discounts in one out of every five transactions that were eligible for discounts. Front-end sales discounts are offered to customers who are making large mutual fund investments - usually between $25,000.00 and $50,000.00. The Financial Industry Regulatory Authority (FINRA) is expecting firms to make refunds to their customers where they are aware that their customers did not receive a discount to which they were entitled. In addition, FINRA is expecting firms to make refunds when clients come forward and show that they did not receive all applicable discounts.
Mutual funds typically offer more than one "class" of shares to investors. Each class represents the same interest in the mutual fund, but the sales charges, fees, and expenses will vary. For example, Class A shares require investors to pay a front-end sales charge or "load" that is deducted from the initial investment amount - a 5% front-end sales load at a cost of $1,000 will generate a $50 sales load with $950 remaining invested in the mutual fund. Investors may qualify for a breakpoint discounts in a number of ways: 1) the amount invested exceeds a breakpoint threshold; 2) a letter of intent is written stating that the customer will invest an amount greater than a break-point threshold within a specified time established by the fund; and 3) having rights of accumulation, which allow customers to combine future purchases with earlier ones to exceed a break-point threshold. Each mutual fund family sets its own breakpoint discounts and sets the rules regarding which accounts will count towards breakpoint discounts.
Securities firms must make a refund if an investor has a valid claim that he or she was overcharged. In fact, many firms have already begun to refund excessive front-end sales load charges to their customers. FINRA is directing more than 450 securities firms to notify customers who purchased Class A mutual fund shares since 1999 that they may be due discounts resulting from their respective firms' failure to provide breakpoint discounts. FINRA is also requiring nearly 175 of those firms with poor records of providing breakpoint discounts to complete a comprehensive review of transactions since 2001 for possible missed discount opportunities.
Do you believe you are entitled to breakpoint discounts, but have not yet received a refund? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

INVESTORS NATIONWIDE BEWARE - CLASS B MUTUAL FUND SHARES MAY NOT BE RIGHT FOR YOU!

When investors buy mutual funds through their brokers, it usually involves choosing among different share classes. The only difference between share classes is the amount of fees the broker will be paid and the amount of expenses the funds will charge. Oftentimes, investors are persuaded into purchasing Class B mutual fund shares when it may not be cost-effective for them, particularly when the trade plus assets already managed by that family exceeds $100,000.00. By purchasing B shares, investors may also be forgoing breakpoint discounts they are eligible for.
Class B shares do not impose a front-end sales fee or "load" that is deducted at the moment of investment - unlike Class A shares, all of the investor's money will be put to work. B share owners do incur higher 12b-1 fees (to cover marketing and distribution costs) than A shares, and B shares also impose a contingent deferred sales charge (CDSC), which the investors will pay if he or she sells shares within a certain number of years. The CDSC typically reduces each year, and is usually eliminated after six or more years. Selling class B shares during the period in which the CDSC applies can significantly diminish the overall return of the investment.
Mutual fund investors must be aware that when purchasing large amounts of B shares, normally over $50,000, they cannot take advantage of breakpoint discounts that may be available to them in A shares. Abuses regarding B share sales have been reported and are currently under investigation. That is why investors interested in investing an amount of cash large enough to qualify for breakpoints should discuss with their brokers whether A shares would be a better option than B shares.
Do you believe your purchase of Class B shares resulted from an improper sale? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.

WATCH OUT INVESTORS--FINRA WARNS INVESTORS ABOUT FLOATING RATE BOND FUNDS

The Financial Industry Regulatory Authority (FINRA) warns that floating rate bank loans come with significant risks, including potential credit, valuation and liquidity problems. Contrary to popular belief, bank loan funds are more correlated with the stocks than bonds. In good economic times floating rate loans may gain in value, though not nearly as much as stocks. But in bad economic times, funds of floating rate loans may perform worse than junk bond funds ("A Risky Reach for Yield," Bloomberg Businessweek).
The bank loans are typically made to buyout firms. These firms have a practice of "piling debt on to companies they own to extract payouts," which "may reduce the credit-worthiness of borrowers and make defaults more likely," according to the article.

As always, investors and their financial advisors need to carefully assess the risks and the investor's investment objective and risk tolerance before investing.

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

WATCH OUT INVESTORS--FLOATING-RATE BOND FUNDS ARE A "RISKY YIELD PLAY"

According to Jonnelle Marte of the Wall Street Journal, floating rate funds are a "Risky Yield Play." They have significant risks and investors must be aware of the downside. The increased demand for floating rate bonds has the effect of driving down yields. For example, during the credit crunch triple-C-rated companies paid as much as 47 percent for loans, but today that is down to 14 percent. Thus most of the returns have already been made.

Not so obvious is the fact that higher demand also results in looser restrictions for borrowers. These so-called "covenant-lite" loans, which have more relaxed repayment terms that are good for high-risk borrowers but bad for investors, now comprise 20 percent of the market - near the peak of 25 percent in 2007, according to the article.

Investors should be skeptical of the credit quality of floating rate loans. If the economy worsens, investors could experience significant 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.

JPMORGAN PUSHED PROPRIETARY FUNDS ON INVESTORS

JPMorgan, one of the nation's largest mutual fund managers, reportedly pushed its proprietary products as other parts of the bank were shrinking. JPMorgan was motivated to put its financial interest ahead of its clients (mostly ordinary investors) by the slump after the financial crisis and the firm's need to make up for lost profits.

The primary benefit to JPMorgan of selling proprietary funds is the fees the firm collects for managing them. The aggressive sales push allowed JPMorgan to gather assets on which to earn fees, despite the industry trend of ordinary investors leaving stock funds in droves, and despite the overall poor performance of its funds. Approximately 42 percent of its funds failed to beat the average performance of funds that make similar investments over the last three years, according to Morningstar.

JPMorgan financial advisers say that they were encouraged to push the firm's proprietary products despite the availability of less expensive, better performing alternatives, and that the firm exaggerated the returns of at least one crucial offering (See "Former Brokers Say JPMorgan Favored Selling Banks' Own Funds Over Others," by Susanne Craig and Jessica Silver-Greenberg).

"I was selling JPMorgan funds that often had weak performance records, and I was doing it for no other reason than to enrich the firm," Geoffrey Tomes, who left JPMorgan last year and is now an adviser at an independent firm, was quoted as saying, adding: "I couldn't call myself objective."

"It said financial adviser on my business card, but that's not what JPMorgan actually let me be," Mathew Goldberg, a former JPMorgan broker was quoted as saying, adding: "I had to be a salesman even if what I was selling wasn't that great."

Many other firms have discontinued offering their own funds because of the conflicts of interest, according to the article, which names Morgan Stanley and Citigroup as having largely exited the business.

One of JPMorgan's core products, Chase Strategic Portfolio, contains a mix of both proprietary and non-proprietary mutual funds. JPMorgan receives an annual fee as high as 1.6 percent of the $20 billion of assets in the Chase Strategic Portfolio, compared with 1% typically charged by an independent investment advisor, and also earns a fee on the underlying JPMorgan funds.

Experts are concerned that JPMorgan is recommending proprietary funds for profit reasons rather than client needs. "There is a real concern about conflicts of interest," Andrew Metrick, a professor at the Yale School of Management, was quoted as saying.

Experts are also concerned that investors are being misled. Marketing materials for the Chase Strategic Portfolio emphasize hypothetical returns when the actual returns are significantly lower.

Advisers are reportedly pressured to recommend the firm's proprietary products by an "intense sales culture." The article relates how one branch supervisor sent a congratulatory note with the header "KABOOM" to an adviser who had persuaded a client to put $75,000 into the Chase Strategic Portfolio with the comment: "Nice to know someone is taking advantage of the best-selling day of the week!" JPMorgan also circulates a list of top-performing brokers.

"It was all about the money, not the client," said Warren Rockmacher, a former JPMorgan broker was quoted as saying, adding that if a customer did not invest in the Chase Strategic Portfolio, a manager would ask him why not.

In summary, pushing proprietary products is a way for the firm to make money at the client's expense. It is incompatible with the image of a "trusted adviser" that firms try to project in their advertising.

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

WATCH OUT INVESTORS--DON'T GET PUSHED INTO ALTERNATIVE INVESTMENT MUTUAL FUNDS

Investors have been misled into believing that alternative investment mutual funds will deliver short-term positive returns in any type of market conditions. There have been two bear markets since 2000 and the S&P 500 stock index is almost 10 percent lower today than it was in 2000. Investors have not forgotten and are desperately exploring viable investment options. According to John Waggoner (USA Today), investors' fear and loathing of the stock market has resulted in $182 billion in outflows from actively managed stock mutual funds since the bottom in March 2009, and record inflows into various alternative investment mutual funds ("Funds Craft Lures for Skittish Investors"). They include "long-short" funds, which both buy some stocks and sell other stocks short; volatility funds, which bet on how violently the market lurches in one direction or the other; bear funds, which sell short in the belief that markets will fall in the short term; and absolute return funds, which speculate in risky securities like commodities, foreign currencies, and emerging markets.

In the past 12 months, however, the S&P 500 has returned 4.6 percent, but market neutral funds are down 1.4 percent, long-short funds are down 2.7 percent, currency funds are down 5.4 percent, and multi-alternative funds are down 2.6 percent, according to the article, citing Morningstar.

And so, why should investors allow advisors to push them into investments they don't understand, that employ new and untested strategies and the highest fees and expenses? Don't jump into alternative investment mutual funds simply because you're disappointed with your stock and bond mutual funds. If you do, the new alternative investment track record indicates you will only be disappointed!

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

WATCH OUT INVESTORS--HEDGE FUND-LIKE MUTUAL FUNDS UNDERPERFORM THE MARKET

Hedge fund-like mutual funds are "today's hottest yet least rewarding strategy," according to Lewis Braham ("Serving Up Disappointment," Bloomberg Markets). They use market-neutral, long-short, managed-futures and other alternative strategies. The long and short of it is that they cost more and may return less than an index fund. Expenses can be as high as 6.7 percent.

Highbridge Statistical Market Neutral mutual fund is a case in point. The fund was created by JP Morgan hedge fund managers, and holds $866 million in equal portions of long and short positions, according to the article. During the seven years from inception through March 2012, its annualized return was 1.2 percent - compared to 4.1 percent for the S&P 500 stock index. That dismal return put it at the head of the class of 255 hedged U.S. mutual funds.

Alternative investments have been pitched as a panacea to investors who have lost faith in traditional stock and bond investments. Observers say the flow of investor funds into alternatives has begun to slow due to poor performance, high fees, valuation issues and illiquidity.

Have you suffered any hedge fund-like mutual fund losses? If so, call 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.