Mark Timothy Youngs, a broker formerly with New York, New York based RBC Capital Markets, LLC, submitted a Letter of Acceptance, Waiver and Consent in which he was fined $5,000, suspended, and consented to the entry of the Financial Industry Regulatory Authority's (FINRA) findings that he recommended to a brokerage customer that he sell a municipal bond and purchase a unit investment trust (UIT) comprised of certain international bonds, which was subsequently contested by the customer. FINRA said that having understood the customer to have authorized the transactions, Mr. Youngs sold the bond and purchased the UIT in the customer's account. After having received transaction confirmations, the customer approached Mr. Youngs questioning the sell transaction in his account and claiming that it had not been authorized. After this confrontation, Mr. Youngs created and provided to the customer a document that made it appear that the municipal bond had been redeemed by the issuer rather than sold. FINRA also said that when Mr. Youngs' manager questioned him about the transactions in the customer's account, Mr. Youngs immediately admitted that he had created and provided to the customer a sham redemption notice. Mr. Young, of Annapolis, Maryland, was terminated by RBC Capital Markets, and he was suspended from association with any FINRA member in any capacity for four months.
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 the above described prohibited activity or other forms of similar misconduct can bring forth claims to recover losses against RBC Capital Markets, which should have prevented Mr. Youngs from committing the described illegal acts. Have you suffered losses in your RBC Capital Markets, LLC account due to 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.
Showing posts with label RBC Capital Markets. Show all posts
Showing posts with label RBC Capital Markets. Show all posts
Friday, August 9, 2013
Friday, July 19, 2013
RBC CAPITAL MARKETS LLC - CIP LEVERAGED FUND ADVISORS, LLC - INVESTOR ALERT!
Many investors have purchased CIP Leveraged Fund Advisors, LLC ("CLFA") through an independent broker-dealer, RBC Capital Markets LLC ("RBC Capital"). CLFA was supposed to be a manager of Real Estate Investment Trusts (REITs), but failed miserably. RBC Capital is an independent broker-dealer in the United States who offered and sold CLFA to its best clients. RBC Capital is headquartered in New York, New York and reportedly has registered representatives across the United States operating in one or two person offices.
RBC Capital, like all broker-dealers engaging in a Regulation D securities offering such as CLFA, was responsible under the Financial Industry Regulatory Authority ("FINRA") rules to conduct "due diligence," that is, conduct a reasonable investigation of the CLFA securities offering and the issuer's representations about itself, the offering, its management, and business prospects, including any targeted returns on the investment to investors and determining the "suitability" of this investment for any and all of its clients.
Independent Due Diligence of CLFA by RBC Capital was Mandatory
RBC Capital and other broker-dealers could not simply rely upon an issuer of securities like CLFA, the issuer's attorneys or the lead broker-dealer Pacific Cornerstone Capital, Inc. ("PCCI") to conduct the investigation for it particularly where that lead broker-dealer has a relationship with the issuer, which is an inherent "conflict of interest."
Under FINRA Rules, all broker-dealers are responsible for discovering and investigating any information that could be considered a "red flag" and alerting a prudent person to conduct further inquiry. All broker-dealers have a responsibility to conduct a reasonable investigation and are obligated to follow up on any "red flags" that it encounters during its inquiry as well as to investigate any substantial adverse information about the issuer and its management. When presented with "red flags," the broker-dealer must do more than simply rely upon representations by issuer's management, the disclosure and an offering document or even a due diligence report of issuer's counsel or some third party expert.
It is reported that your CLFA investment is now worthless. PCCI and it's principal, Terry Roussel, were fined and/or suspended by FINRA for making misleading statements to investors in connection with the CLFA offering.
Thus far, two other broker-dealers have been investigated and sanctioned by FINRA for violations relating to their own failure to conduct due diligence on CLFA prior to recommending it to their best clients, namely, Investors Capital Corp. and Workman Securities Corporation. FINRA has reported that one or more of these broker-dealers failed to conduct any reasonable due diligence investigation on CLFA prior to selling CLFA securities. Further, they did not seek independent third party due diligence reports, meet with or ask questions of management about certain disclosures in the PPM relating to projections and targets or even review unaudited CLFA financial statements, which violated the rules. It has also been reported that they reviewed third party reports that did not include an analysis of how investors in CLFA would recover their principal investment and whether the projected 18.75% yield was realistic.
All of this begs the question: Did RBC Capital perform an independent due diligence analysis before it recommended the investment to its best clients? What analysis, if any, did RBC Capital perform of how investors would recover their principal investment and whether the projected 18.75% yield was realistic? FINRA investigations are confidential and although FINRA has not reportedly taken any action against RBC Capital to date, the failure of any broker-dealer to conduct those types of inquiries could constitute a violation of FINRA rules and entitle you to recovery of your investment losses from that brokerage firm.
RBC Capital was Obligated to Perform a Suitability Analysis
RBC Capital was also required to have reasonable grounds to believe that a recommendation to purchase a security is suitable for the customer. This analysis has two principal components. First, the "reasonable basis" suitability analysis requires the broker-dealer to have a reasonable basis to believe, based on a reasonable investigation, that the recommendation is suitable for at least some investors. If there is no reasonable basis for any of the targeted returns, then the securities offered are not suitable for any investor. Second, the "customer specific suitability" analysis requires the broker-dealer to determine whether the security is suitable for the customer to whom it would be recommended. This second suitability analysis is dependent upon the investor's stated investment objectives, risk tolerance and financial condition. Any recommendation by a broker that does not satisfactorily comply with either component can be a violation of FINRA rules.
For most investors, liquidity, income and risk tolerance are a concern, but if you are elderly and retired, they are paramount! If you have limited resources and no ability to generate income from other sources to meet your liquidity and income needs then CLFA was an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then the speculative CLFA investment was unsuitable. The suitability problem is compounded when any investors' portfolio is concentrated in CLFA. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in any illiquid real estate investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!
Know Your Rights and Get Your Questions Answered!
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 CLFA and this blog post and/or any related matter.
RBC Capital, like all broker-dealers engaging in a Regulation D securities offering such as CLFA, was responsible under the Financial Industry Regulatory Authority ("FINRA") rules to conduct "due diligence," that is, conduct a reasonable investigation of the CLFA securities offering and the issuer's representations about itself, the offering, its management, and business prospects, including any targeted returns on the investment to investors and determining the "suitability" of this investment for any and all of its clients.
Independent Due Diligence of CLFA by RBC Capital was Mandatory
RBC Capital and other broker-dealers could not simply rely upon an issuer of securities like CLFA, the issuer's attorneys or the lead broker-dealer Pacific Cornerstone Capital, Inc. ("PCCI") to conduct the investigation for it particularly where that lead broker-dealer has a relationship with the issuer, which is an inherent "conflict of interest."
Under FINRA Rules, all broker-dealers are responsible for discovering and investigating any information that could be considered a "red flag" and alerting a prudent person to conduct further inquiry. All broker-dealers have a responsibility to conduct a reasonable investigation and are obligated to follow up on any "red flags" that it encounters during its inquiry as well as to investigate any substantial adverse information about the issuer and its management. When presented with "red flags," the broker-dealer must do more than simply rely upon representations by issuer's management, the disclosure and an offering document or even a due diligence report of issuer's counsel or some third party expert.
It is reported that your CLFA investment is now worthless. PCCI and it's principal, Terry Roussel, were fined and/or suspended by FINRA for making misleading statements to investors in connection with the CLFA offering.
Thus far, two other broker-dealers have been investigated and sanctioned by FINRA for violations relating to their own failure to conduct due diligence on CLFA prior to recommending it to their best clients, namely, Investors Capital Corp. and Workman Securities Corporation. FINRA has reported that one or more of these broker-dealers failed to conduct any reasonable due diligence investigation on CLFA prior to selling CLFA securities. Further, they did not seek independent third party due diligence reports, meet with or ask questions of management about certain disclosures in the PPM relating to projections and targets or even review unaudited CLFA financial statements, which violated the rules. It has also been reported that they reviewed third party reports that did not include an analysis of how investors in CLFA would recover their principal investment and whether the projected 18.75% yield was realistic.
All of this begs the question: Did RBC Capital perform an independent due diligence analysis before it recommended the investment to its best clients? What analysis, if any, did RBC Capital perform of how investors would recover their principal investment and whether the projected 18.75% yield was realistic? FINRA investigations are confidential and although FINRA has not reportedly taken any action against RBC Capital to date, the failure of any broker-dealer to conduct those types of inquiries could constitute a violation of FINRA rules and entitle you to recovery of your investment losses from that brokerage firm.
RBC Capital was Obligated to Perform a Suitability Analysis
RBC Capital was also required to have reasonable grounds to believe that a recommendation to purchase a security is suitable for the customer. This analysis has two principal components. First, the "reasonable basis" suitability analysis requires the broker-dealer to have a reasonable basis to believe, based on a reasonable investigation, that the recommendation is suitable for at least some investors. If there is no reasonable basis for any of the targeted returns, then the securities offered are not suitable for any investor. Second, the "customer specific suitability" analysis requires the broker-dealer to determine whether the security is suitable for the customer to whom it would be recommended. This second suitability analysis is dependent upon the investor's stated investment objectives, risk tolerance and financial condition. Any recommendation by a broker that does not satisfactorily comply with either component can be a violation of FINRA rules.
For most investors, liquidity, income and risk tolerance are a concern, but if you are elderly and retired, they are paramount! If you have limited resources and no ability to generate income from other sources to meet your liquidity and income needs then CLFA was an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then the speculative CLFA investment was unsuitable. The suitability problem is compounded when any investors' portfolio is concentrated in CLFA. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in any illiquid real estate investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!
Know Your Rights and Get Your Questions Answered!
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 CLFA and this blog post and/or any related matter.
Saturday, December 8, 2012
WHISTLEBLOWER PAYDAY COMING SOON!
The SEC is expected to pay hundreds of millions of dollars to whistleblowers very soon. In fact, according to a New York Post article, "SEC set to hand out up to $452M to whistleblowers." Whistleblowers can collect from 10 percent to 30 percent of what the government recovers when a tip has helped the government obtain the recovery. So far, tips have exposed all manner of corporate wrongdoing, ranging from insider trading and rigged bonds deals to cover-ups of cooked books and bribes. SEC officials are eager to pay out and publicize the first whistleblower award, as they anticipate the news will result in a flurry of new tips.
A case against Wachovia Bank is illustrative of how the program works. Last December the bank paid a penalty of $25 million to settle a probe into rigging municipal bond sales. If a whistleblower's tip helped the SEC bring the case, it could be worth up to 30 percent of the SEC's take to the whistleblower - or $7.5 million.
Other large whistleblower awards could flow from the following SEC recoveries, among others:
• $92.8 million in penalties from convicted hedge fund boss Raj Rajaratnam,
• $59.6 million from Hungarian telecom Magyar Telekon to settle charges of bribing officials,
• $22 million from RBC Capital Markets to settle a probe into rigging muni bond deals, and
• $32.5 million from JP Morgan Securities to end a probe into irregularities in bond sales.
SEC investigators received nine tips per day on average during the first two months the program was launched.
The whistleblower program, a product of Dodd Frank legislation, may be the best strategy the SEC has deployed since it has been formed. People now have an incentive to report fraud. The tipsters can remain confidential and justice can be served at the same time through attorney representation. Robert Pearce, a former SEC Enforcement Division attorney, has close ties with the Division and his firm is well equipped to represent confidential informants and secure their reward for helping to protect the integrity of the financial markets!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
A case against Wachovia Bank is illustrative of how the program works. Last December the bank paid a penalty of $25 million to settle a probe into rigging municipal bond sales. If a whistleblower's tip helped the SEC bring the case, it could be worth up to 30 percent of the SEC's take to the whistleblower - or $7.5 million.
Other large whistleblower awards could flow from the following SEC recoveries, among others:
• $92.8 million in penalties from convicted hedge fund boss Raj Rajaratnam,
• $59.6 million from Hungarian telecom Magyar Telekon to settle charges of bribing officials,
• $22 million from RBC Capital Markets to settle a probe into rigging muni bond deals, and
• $32.5 million from JP Morgan Securities to end a probe into irregularities in bond sales.
SEC investigators received nine tips per day on average during the first two months the program was launched.
The whistleblower program, a product of Dodd Frank legislation, may be the best strategy the SEC has deployed since it has been formed. People now have an incentive to report fraud. The tipsters can remain confidential and justice can be served at the same time through attorney representation. Robert Pearce, a former SEC Enforcement Division attorney, has close ties with the Division and his firm is well equipped to represent confidential informants and secure their reward for helping to protect the integrity of the financial markets!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Thursday, December 6, 2012
FINRA AND RBC WEALTH MANAGEMENT UNIT FERRIS, BAKER WATTS SETTLE CHARGES REGARDING REVERSE CONVERTIBLES
The Financial Regulatory Industry Authority (FINRA) and RBC Wealth Management have agreed to settle charges related to sales of reverse convertibles by Ferris, Baker Watts to elderly clients. The brokerage firm will pay $190,000.00 in restitution to 57 account holders, many of who are older than 85 years old, for losses incurred. On example cited by FINRA is the sale of five reverse convertibles in the amount of $10,000.00 each to an 86-year-old, which comprised between 15 and 25% of her portfolio. According to FINRA's report, close to 2,000 retail investors were sold reverse convertibles between January 2006 and July 2008. FINRA alleged that Ferris, Baker Watts failed to properly supervise and guide managers and brokers on determining whether the product was suitable for clients. In addition, the firm was accused of not establishing a system that could monitor, find, and correct reverse convertible over-concentrations.
Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.
Most investors are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize though is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have averaged 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.
Have you suffered a loss in a reverse convertible? 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.
Reverse convertibles are alternative investments that are not suitable for all investors. Their complexity is hardly ever understood, and they are oftentimes misrepresented as fixed income products. Reverse convertibles are made of a note and a derivative. The note is a loan by the investor to the issuer that pays an income stream to the investor, while the derivative establishes the payment at maturity. The derivative can either be a put option, which would allow the issuer to sell the underlying derivative or security back to the investor, or it can be a call option, which would allow the issuer the right to buy the underlying security at a predetermined price.
Most investors are not capable of evaluating whether reverse convertibles are suitable investments. What investors should recognize though is that reverse convertibles put principal at risk if the price of the underlying security rises above or falls below a predetermined amount. The issuer will either sell or buy the security, which may cause investors to lose a significant amount of principal. However, investors are attracted to reverse convertibles because of their yields; reverse convertibles have averaged 13% in certain years. This comes as no surprise since yields on CDs and other conservative investments are near all-time lows, and fixed income investors need to generate income to pay bills and keep up with increasing costs. Still, investors must realize that reverse convertibles are not the solution. Rather than chase yields and risk losing hard earned savings, investors need to stick to what is suitable for them in order to avoid financial calamity.
Have you suffered a loss in a reverse convertible? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Sunday, October 21, 2012
FINRA FINES RBC CAPITAL MARKETS, LLC OVER UNFAIR CMO MARKUPS/MARKDOWNS TO INVESTORS NATIONWIDE
RBC Capital Markets, LLC recently submitted a Letter of Acceptance, Waiver and Consent in which the firm was censured and fined $25,000.
Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that in Collateralized Mortgage Obligations (CMOs) transactions with mostly retail, non-institutional customers, it charged markups and markdowns that were as high as 16.9 percent.
The findings stated that these charges exceeded the firm's own internal guidelines based on the type and maturity of each security. The firm's internal guidelines were intended to ensure that charges were fair, reasonable and compliant with NASD Rule 2440.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Without admitting or denying the findings, the firm consented to the described sanctions and to the entry of findings that in Collateralized Mortgage Obligations (CMOs) transactions with mostly retail, non-institutional customers, it charged markups and markdowns that were as high as 16.9 percent.
The findings stated that these charges exceeded the firm's own internal guidelines based on the type and maturity of each security. The firm's internal guidelines were intended to ensure that charges were fair, reasonable and compliant with NASD Rule 2440.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Mr. Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. Our law firm is devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
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