MML Investor Services LLC was subpoenaed by Massachusetts in connection with a sweep investigation, which is looking into sales practices involving alternative investments sold to seniors. MML Investor Services' principal office is located in Springfield, Massachusetts. On July 10, 2013, the state's securities division sent the subpoena to MML Investor Services 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 MML Investor Services 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 MML Investor Services 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 MML Investor Services LLC 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 MML Investor Services stockbrokers who may have engaged in misconduct and caused investors losses.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Showing posts with label Seniors. Show all posts
Showing posts with label Seniors. Show all posts
Sunday, December 22, 2013
Thursday, February 7, 2013
LPL FINANCIAL SUED FOR REIT SALES PRACTICES
The Commonwealth of Massachusetts Securities Division has recently charged LPL with "dishonest and unethical business practices." The Massachusetts complaint focused on seven Real Estate Investment Trust (REIT) products:
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 a non-traded REIT is an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then speculative non-traded REITs are unsuitable investments. The suitability problem is compounded when any investor's portfolio is concentrated in non-traded REIT investments. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in real estate investments, including REIT investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!
Every brokerage firm has the responsibility of "knowing the customer" and making a customer specific "suitability" determination for every investment recommendation. The "Suitability Rule," Financial Industry Regulatory Authority (FINRA) Rule 2111, requires that a firm or associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." This is a new rule, but it contains the core features of the previous National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") suitability rules and codifies well-settled interpretations of those rules. Brokerage firms and their associated persons have always had the responsibility to make suitable recommendations in light of an individual's stated investment objectives and financial condition, tax status, and other relevant factors. According to FINRA, some non-traded Real Estate Investment Trust investments ("REITs") aren't suitable for anyone based on the offering terms, misrepresentations and unreasonable projections by the promoters (see FINRA News Release "FINRA Issues Investor Alert on Public Non-Traded REITs").
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 REIT investments as the 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. But these products offer little liquidity for investors who at this stage of their life are likely to need to dip into their investment savings to support their lifestyle or for medical and other emergencies. There is no public market for REITs, and early redemption of shares in REITs is often very limited. In addition, the fees associated with the sales of these products can be high and erode the total return, if they can be sold at all. Further, many of these investments do not truly generate income but make distributions with borrowed money, with newly raised capital, or by a return of principal rather than a return on investment, which can stop at any time. Although non-traded REITs may offer some diversification benefits as part of a balanced portfolio, they all have underlying risk characteristics that make them unsuitable for certain investors, particularly the elderly retired investor with limited financial resources.
Have you suffered losses resulting from an investment in any REIT purchased from LPL Financial? 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 LPL Financial who fraudulently offered and sold the REITs 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.
- Inland American
- Cole Credit Property Trust II, Inc.
- Cole Credit Property Trust III, Inc.
- Cole Credit Property 1031 Exchange
- Wells Real Estate Investment Trust II, Inc.
- W.P. Carey Corporate Property Associates 17
- Dividend Capital Total Realty
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 a non-traded REIT is an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then speculative non-traded REITs are unsuitable investments. The suitability problem is compounded when any investor's portfolio is concentrated in non-traded REIT investments. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in real estate investments, including REIT investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!
Every brokerage firm has the responsibility of "knowing the customer" and making a customer specific "suitability" determination for every investment recommendation. The "Suitability Rule," Financial Industry Regulatory Authority (FINRA) Rule 2111, requires that a firm or associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." This is a new rule, but it contains the core features of the previous National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") suitability rules and codifies well-settled interpretations of those rules. Brokerage firms and their associated persons have always had the responsibility to make suitable recommendations in light of an individual's stated investment objectives and financial condition, tax status, and other relevant factors. According to FINRA, some non-traded Real Estate Investment Trust investments ("REITs") aren't suitable for anyone based on the offering terms, misrepresentations and unreasonable projections by the promoters (see FINRA News Release "FINRA Issues Investor Alert on Public Non-Traded REITs").
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 REIT investments as the 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. But these products offer little liquidity for investors who at this stage of their life are likely to need to dip into their investment savings to support their lifestyle or for medical and other emergencies. There is no public market for REITs, and early redemption of shares in REITs is often very limited. In addition, the fees associated with the sales of these products can be high and erode the total return, if they can be sold at all. Further, many of these investments do not truly generate income but make distributions with borrowed money, with newly raised capital, or by a return of principal rather than a return on investment, which can stop at any time. Although non-traded REITs may offer some diversification benefits as part of a balanced portfolio, they all have underlying risk characteristics that make them unsuitable for certain investors, particularly the elderly retired investor with limited financial resources.
Have you suffered losses resulting from an investment in any REIT purchased from LPL Financial? 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 LPL Financial who fraudulently offered and sold the REITs 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.
Wednesday, January 30, 2013
SENIOR INVESTORS MUST PROCEED WITH CAUTION WHEN USING SOCIAL MEDIA IN MAKING INVESTMENTS
Whether it is to keep in touch with distant family members, or to keep up with the latest news, elderly Americans are beginning to use social media on a daily basis. This daily activity has also steered many senior investors to use social media to help make investment decisions. Web-based platforms that allow interactive communication, such as Facebook, YouTube, Twitter, LinkedIn, bulletin boards, and chat rooms, have become an important investment tool for researching particular stocks, investigating a financial professional's background, gathering up-to-date news on a company, or to discuss the markets with other investors. Although social media can provide many benefits, it also presents opportunities for fraudsters targeting senior investors. As a result, seniors need to proceed with caution when using social media in making their investment decisions.
The key to avoiding investment scams on the internet is to be an educated investor. Below are four tips to help senior investors avoid securities fraud:
•1) Look out for "Red Flags" - Whenever an investment touts "incredible gains" or "breakout stock pick," consider it to be a hallmark of extreme risk or outright fraud. Also, do not believe a promise of guaranteed returns with "no risk." Every investment entails some risk, which is reflected in the rate of return you can expect to receive. Moreover, you should carefully examine any unsolicited offer to invest outside the United States. Many fraudsters set up offshore operations to evade supervision by regulators. Last, do not be pressured into buying an investment before you have a chance to think about the opportunity, even if it is "once in a lifetime."
•2) Look out for "Affinity Fraud" - An investment pitch made through an online group of which you are a member may be an affinity fraud. Affinity fraud refers to investment scams that prey upon members of identifiable groups, often senior, religious, or ethnic communities, professional groups, or a combination of such groups. Even if you know the person, be sure to conduct a thorough investigation, no matter how trustworthy the presenter seems to be.
•3) Be Thoughtful about Privacy and Security Settings - Seniors who use social media as a tool for investing should be mindful of the various features on these websites that can help protect privacy. You must understand that unless you guard personal information, it may be available not only to your friends, but for anyone with access to the internet, including fraudsters.
•4) Ask Questions and Check out the Answers - Never judge a person's integrity, or the merits of an investment, without doing thorough research on both the person selling the investment and the investment itself. Investigate the investment thoroughly and check every statement you are told about the investment. You can use the SEC's EDGAR filing system to investigate investments, FINRA's BrokerCheck to check registered brokers, and registered investment advisers at the SEC's Investment Adviser Public Disclosure website.
In addition, some financial professionals are using social media to attract new clients. These financial professionals may use designations such as "senior specialist" or "retirement advisor" to imply that they are experts at helping seniors with financial issues. Therefore, investors are encouraged to always look beyond a financial professional's designation and determine whether he or she can provide the type of financial services or products needed. Investors should thoroughly evaluate the background of anyone with whom he or she intends to do business before handing over hard-earned cash.
Have you suffered losses resulting from an investment offering through a web-based social media platform? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
The key to avoiding investment scams on the internet is to be an educated investor. Below are four tips to help senior investors avoid securities fraud:
•1) Look out for "Red Flags" - Whenever an investment touts "incredible gains" or "breakout stock pick," consider it to be a hallmark of extreme risk or outright fraud. Also, do not believe a promise of guaranteed returns with "no risk." Every investment entails some risk, which is reflected in the rate of return you can expect to receive. Moreover, you should carefully examine any unsolicited offer to invest outside the United States. Many fraudsters set up offshore operations to evade supervision by regulators. Last, do not be pressured into buying an investment before you have a chance to think about the opportunity, even if it is "once in a lifetime."
•2) Look out for "Affinity Fraud" - An investment pitch made through an online group of which you are a member may be an affinity fraud. Affinity fraud refers to investment scams that prey upon members of identifiable groups, often senior, religious, or ethnic communities, professional groups, or a combination of such groups. Even if you know the person, be sure to conduct a thorough investigation, no matter how trustworthy the presenter seems to be.
•3) Be Thoughtful about Privacy and Security Settings - Seniors who use social media as a tool for investing should be mindful of the various features on these websites that can help protect privacy. You must understand that unless you guard personal information, it may be available not only to your friends, but for anyone with access to the internet, including fraudsters.
•4) Ask Questions and Check out the Answers - Never judge a person's integrity, or the merits of an investment, without doing thorough research on both the person selling the investment and the investment itself. Investigate the investment thoroughly and check every statement you are told about the investment. You can use the SEC's EDGAR filing system to investigate investments, FINRA's BrokerCheck to check registered brokers, and registered investment advisers at the SEC's Investment Adviser Public Disclosure website.
In addition, some financial professionals are using social media to attract new clients. These financial professionals may use designations such as "senior specialist" or "retirement advisor" to imply that they are experts at helping seniors with financial issues. Therefore, investors are encouraged to always look beyond a financial professional's designation and determine whether he or she can provide the type of financial services or products needed. Investors should thoroughly evaluate the background of anyone with whom he or she intends to do business before handing over hard-earned cash.
Have you suffered losses resulting from an investment offering through a web-based social media platform? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Monday, January 14, 2013
INVESTORS NATIONWIDE BEWARE - THERE IS NO SUCH THING AS A FREE LUNCH!
If you have not been invited to a free-meal investment seminar yet, chances are you will be in the near future. If you decide to go, you need to be prepared. This is because financial advisors who host free-meal seminars promise to educate attendees about investing strategies or managing money in retirement - you will also enjoy an expensive meal provided at no cost. However, because someone in a suit buys you lunch or dinner does not mean you have to buy what they are saying or selling. In many cases, free-meal investment seminars are not solely about education. Their ultimate goals are to recruit new clients and sell products - while some sales proposals may be easy for investors to swallow, the consequences can be hard to stomach.
Free investment seminars are popular and widespread. The Financial Industry Regulatory Authority (FINRA) Investor Education Foundation surveyed and found that four out of five investors age 60 and up got at least one invitation to a free investment seminar in the past three years - three out of five got six or more invitations. 25 percent of invitees said that they went to at least one seminar within the three-year period.
There is potentially nothing wrong with a free lunch. However, problems can arise when the speaker has something to sell to the audience. To examine these problems, securities regulators, including FINRA, the Securities and Exchange Commission (SEC), and state regulators, conducted more than 100 examinations involving free-meal seminars. In half the cases, the invitations and advertisements contained claims that appeared to be exaggerated, misleading, or otherwise unwarranted. 12 percent of the seminars appeared to involve fraud, ranging from unfounded projections of returns to sales of fictitious products.
If you are considering attending an investment seminar, the following points should be kept in mind while undergoing a hard sale effort:
-Seminars are designed to sell: Even when advertised as educational, many investment seminars are conducted to sell financial products. Keep in mind that sales pitches might include confusing comparisons of dissimilar products or misleading information about the safety, performance, and returns of the products.
-A good show is not always a good deal: People are generally inclined to take advice from a well-dressed speaker in a high-end restaurant or hotel. This is exactly why investment seminars are held at upscale venues. Be sure to take the time and assess whether the opportunity is right for you.
-The speaker might not be the sponsor: Even if you recognize the names of the individuals who invite you to seminar or speak at the event, they might not be the sponsors. At times, insurance companies or mutual funds finance the events, expecting that the speaker will use the event to drive up sales of their products.
Have you suffered losses resulting from promises made at a free-meal investment seminar? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Free investment seminars are popular and widespread. The Financial Industry Regulatory Authority (FINRA) Investor Education Foundation surveyed and found that four out of five investors age 60 and up got at least one invitation to a free investment seminar in the past three years - three out of five got six or more invitations. 25 percent of invitees said that they went to at least one seminar within the three-year period.
There is potentially nothing wrong with a free lunch. However, problems can arise when the speaker has something to sell to the audience. To examine these problems, securities regulators, including FINRA, the Securities and Exchange Commission (SEC), and state regulators, conducted more than 100 examinations involving free-meal seminars. In half the cases, the invitations and advertisements contained claims that appeared to be exaggerated, misleading, or otherwise unwarranted. 12 percent of the seminars appeared to involve fraud, ranging from unfounded projections of returns to sales of fictitious products.
If you are considering attending an investment seminar, the following points should be kept in mind while undergoing a hard sale effort:
-Seminars are designed to sell: Even when advertised as educational, many investment seminars are conducted to sell financial products. Keep in mind that sales pitches might include confusing comparisons of dissimilar products or misleading information about the safety, performance, and returns of the products.
-A good show is not always a good deal: People are generally inclined to take advice from a well-dressed speaker in a high-end restaurant or hotel. This is exactly why investment seminars are held at upscale venues. Be sure to take the time and assess whether the opportunity is right for you.
-The speaker might not be the sponsor: Even if you recognize the names of the individuals who invite you to seminar or speak at the event, they might not be the sponsors. At times, insurance companies or mutual funds finance the events, expecting that the speaker will use the event to drive up sales of their products.
Have you suffered losses resulting from promises made at a free-meal investment seminar? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Wednesday, January 2, 2013
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.
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.
Tuesday, January 1, 2013
DON'T TRADE IN YOUR VARIABLE ANNUITY WITHOUT GETTING BACK ALL OF THE EXCESSIVE FEES!
More and more insurers are offering annuity contract buyouts to owners of Variable Annuity ("VA") contracts with a guaranteed-minimum-withdrawal benefit ("GMWB"). It seems that some insurers recognize an opportunity to retain all of the excessive fees they received from legacy VA clients and coax them out of VA contracts with GMWB features and death benefits within offer of a slightly higher account value. You remember the broker's pitch for the purchase of these VA contracts: "if the value goes down, you are guaranteed income for life"; and "every year the amount of the death benefit increases for your beneficiaries."
Why the change of heart? Well it's because many of the insurers recognize: we're in an extended period of low interest rates, and it's difficult for them to invest and make money; their VA contracts are underwater because the mutual fund sub-accounts performed poorly; and many VA contract owners can't or won't do the math! The insurers at Hartford Financial Services Group, Inc., AXA Equitable Life Ins. Co., Transamerica Life Insurance Co. and Wells Fargo want you to give up your GMWB benefit in exchange for a slightly higher account value with no more guarantees. The only beneficiaries of this exchange will be the brokers who retained all of the excessive upfront commissions and generous trailing commissions and the insurers who will duck out of VA contracts with product features that have now become unprofitable for them.
An annuity is a form of insurance that offers a series of payments for a period of time. VAs 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. Most VAs do not have principal protection, so investors can lose money if markets deteriorate. GMWB gives the VA policy owner the ability to protect their retirement investments against downside market risk by allowing the owner to withdraw a maximum percentage of their entire investment each year until the initial investment amount has been recouped.
Neither the broker nor the insurer looked out for your interest when they sold you this overpriced and unsuitable VA product and they certainly are not looking out for your interest today with the exchange offer. Make sure you consider the excessive fees you paid for the benefits they want to take back as well as the likelihood of future account losses that will no longer be protected in making your decision.
Have you suffered losses resulting from trading in your guaranteed-minimum-withdrawal benefit variable annuity? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Why the change of heart? Well it's because many of the insurers recognize: we're in an extended period of low interest rates, and it's difficult for them to invest and make money; their VA contracts are underwater because the mutual fund sub-accounts performed poorly; and many VA contract owners can't or won't do the math! The insurers at Hartford Financial Services Group, Inc., AXA Equitable Life Ins. Co., Transamerica Life Insurance Co. and Wells Fargo want you to give up your GMWB benefit in exchange for a slightly higher account value with no more guarantees. The only beneficiaries of this exchange will be the brokers who retained all of the excessive upfront commissions and generous trailing commissions and the insurers who will duck out of VA contracts with product features that have now become unprofitable for them.
An annuity is a form of insurance that offers a series of payments for a period of time. VAs 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. Most VAs do not have principal protection, so investors can lose money if markets deteriorate. GMWB gives the VA policy owner the ability to protect their retirement investments against downside market risk by allowing the owner to withdraw a maximum percentage of their entire investment each year until the initial investment amount has been recouped.
Neither the broker nor the insurer looked out for your interest when they sold you this overpriced and unsuitable VA product and they certainly are not looking out for your interest today with the exchange offer. Make sure you consider the excessive fees you paid for the benefits they want to take back as well as the likelihood of future account losses that will no longer be protected in making your decision.
Have you suffered losses resulting from trading in your guaranteed-minimum-withdrawal benefit variable annuity? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Friday, December 21, 2012
STATE SECURITIES REGULATORS COME DOWN HARD ON INVESTMENT ADVISER FIRMS FOR ABUSING SENIOR INVESTORS
The North American Securities Administrators Association (NASAA) has recently reported a major increase in enforcement actions against investment adviser firms last year along with a sharp rise in prison time for securities law violators. According to a NASAA enforcement survey taken every year, the number of enforcement actions involving investment adviser firms nearly doubled to 399 in 2011, which accounted for 15 percent of all enforcement actions handled by state securities regulators. One notable group of investors who faced financial abuses by investment adviser firms was seniors - nearly 600 reported enforcement actions were addressed. Even though state regulators are actively seeking to prevent investment advisers from performing abuses, 6,121 investigations were conducted in 2011, which led to 1,662 years in prison time for convicted violators - up 47 percent from the year before. The report is based on the results of a survey of NASAA members during the spring of 2012.
State securities regulators also took significant investor protection actions by taking away licenses from corrupt broker and investment advisers. In 2011, nearly 2,800 licenses were withdrawn resulting from state action - up 7.7 percent from the year before. In addition, 774 licenses were denied, revoked, suspended, or conditioned - up 20 percent from the previous year. Fortunately, state enforcement actions resulted in more than $2.2 billion in investor restitution orders in 2011 - Most of the restitution resulted from repurchases of auction rate securities stemming from state-led actions. Fines and penalties against investment advisers totaled $126 million.
Apart from the state regulators' efforts to protect senior investors from financial abuses, seniors cannot be urged enough to find a financial advisor or broker they can trust. Unfortunately, it can be difficult to tell whether the broker is acting in his or her best interest. That is why senior investors are also encouraged to employ a trustworthy and financially savvy third-party or family member to monitor a broker's recommendations. Senior investors who feel they are victims of financial abuse should seek the advice of an attorney to review their holdings and initiate an action to recover damages if they have suffered significant losses. All these measures will certainly help prevent significant losses well into retirement, which is when investors need to protect their hard earned money the most.
Do you believe you are a victim of financial abuse because of your status as a senior investor? 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 securities regulators also took significant investor protection actions by taking away licenses from corrupt broker and investment advisers. In 2011, nearly 2,800 licenses were withdrawn resulting from state action - up 7.7 percent from the year before. In addition, 774 licenses were denied, revoked, suspended, or conditioned - up 20 percent from the previous year. Fortunately, state enforcement actions resulted in more than $2.2 billion in investor restitution orders in 2011 - Most of the restitution resulted from repurchases of auction rate securities stemming from state-led actions. Fines and penalties against investment advisers totaled $126 million.
Apart from the state regulators' efforts to protect senior investors from financial abuses, seniors cannot be urged enough to find a financial advisor or broker they can trust. Unfortunately, it can be difficult to tell whether the broker is acting in his or her best interest. That is why senior investors are also encouraged to employ a trustworthy and financially savvy third-party or family member to monitor a broker's recommendations. Senior investors who feel they are victims of financial abuse should seek the advice of an attorney to review their holdings and initiate an action to recover damages if they have suffered significant losses. All these measures will certainly help prevent significant losses well into retirement, which is when investors need to protect their hard earned money the most.
Do you believe you are a victim of financial abuse because of your status as a senior investor? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
THE SEC AND FINRA WARN INVESTORS NATIONWIDE ABOUT PRINCIPAL PROTECTED NOTES
Both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) have issued an alert to investors titled Structured Notes with Principal Protection: Note the Terms of Your Investment. The alert contains information pertaining to how principal protected notes are structured and the risks associated with investing in them. A few examples of what the SEC and FINRA want investors to know about principal protected notes is that they can have complex payout structures, principal lockup periods, and caps on returns. Most importantly, they want investors to know that principal protection is sometimes limited to just 10% of the original investment, and payment will depend on the financial strength of the issuing institution.
A Principal protected note is an investment contract with a guaranteed rate of return of at least the amount invested. Traditional fixed-income investments such as CDs and bonds provide investment security and modest returns with little or no risk of capital loss, while stocks have the potential to deliver greater returns, but with much greater risk. In recent years, investors have turned to structured products such as principal protected notes that offer both security and potential growth for their principal. Principal protected notes are linked to a broad range of underlying investments that may include indices, mutual funds, equities, and even alternative offerings such as hedge funds. At the heart of a principal protected note is a guarantee - typically guaranteeing 100% of invested capital, as long as the note is held to maturity. This means that regardless of market conditions, investors receive back all money they invested plus appreciation from the underlying assets, if any.
The alert recommends that investors consider the following questions before investing in a principal protected note:
-What are the costs?
-Are there any conditions for protection?
-What type of principal protection is offered?
-What are the potential risks?
-Will the product meet investment objectives?
-Are there alternative investment options?
-What is the payout structure?
-Are there tax implications?
-Is there a cap on gains?
-Is a call feature provided?
-Is liquidation permitted prior to maturity?
-For how long will the money be locked up?
Investors must also understand that principal protected notes are subject to the credit risk of the issuer. Consequently, if an issuer is not financially sound, it cannot guarantee 100% redemption of principal at maturity to an investor if the underlying investment deteriorates in value. That is why investors, especially those in retirement, should not be misled by the words "principal protected," no matter how appealing the investment is perceived to be.
Have you suffered a loss in a principal protected note? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
A Principal protected note is an investment contract with a guaranteed rate of return of at least the amount invested. Traditional fixed-income investments such as CDs and bonds provide investment security and modest returns with little or no risk of capital loss, while stocks have the potential to deliver greater returns, but with much greater risk. In recent years, investors have turned to structured products such as principal protected notes that offer both security and potential growth for their principal. Principal protected notes are linked to a broad range of underlying investments that may include indices, mutual funds, equities, and even alternative offerings such as hedge funds. At the heart of a principal protected note is a guarantee - typically guaranteeing 100% of invested capital, as long as the note is held to maturity. This means that regardless of market conditions, investors receive back all money they invested plus appreciation from the underlying assets, if any.
The alert recommends that investors consider the following questions before investing in a principal protected note:
-What are the costs?
-Are there any conditions for protection?
-What type of principal protection is offered?
-What are the potential risks?
-Will the product meet investment objectives?
-Are there alternative investment options?
-What is the payout structure?
-Are there tax implications?
-Is there a cap on gains?
-Is a call feature provided?
-Is liquidation permitted prior to maturity?
-For how long will the money be locked up?
Investors must also understand that principal protected notes are subject to the credit risk of the issuer. Consequently, if an issuer is not financially sound, it cannot guarantee 100% redemption of principal at maturity to an investor if the underlying investment deteriorates in value. That is why investors, especially those in retirement, should not be misled by the words "principal protected," no matter how appealing the investment is perceived to be.
Have you suffered a loss in a principal protected note? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Wednesday, December 19, 2012
CAN I RECOVER MY WELLS REAL ESTATE INVESTMENT TRUST LOSSES?
Many investors in the non-traded Wells REIT have inquired about their ability to recover their losses after learning that their fund is no longer valued as much as they were previously led to believe. As a result, many claims are being filed by Wells REIT and other REIT investors for misrepresentation, unsuitable recommendations and/or overconcentrations of their investment funds in Wells REIT and other REIT investments to recover their REIT losses.
At first blush, one may think that the best claim is against the Wells REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Wells REIT and other REIT investments were recommended by your brokerage firm and financial advisor who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.
The most common misrepresentation and misleading statement claims that the Wells REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that Wells REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in Wells REIT and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are a Wells REIT investor with the same complaints, we believe we can help you recover your REIT losses!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
At first blush, one may think that the best claim is against the Wells REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Wells REIT and other REIT investments were recommended by your brokerage firm and financial advisor who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.
The most common misrepresentation and misleading statement claims that the Wells REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that Wells REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in Wells REIT and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are a Wells REIT investor with the same complaints, we believe we can help you recover your REIT losses!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Sunday, December 9, 2012
BROKERS NATIONWIDE RESTART PUSH FOR INVESTORS TO BUY REVERSE CONVERTIBLES
Investors are once again being pushed into structured products such as reverse convertibles by brokers who tout sturdy profits and very little downside risk. However, representatives are unable to account for why products like reverse convertibles have been unable to deliver stellar returns without posing a significant risk to investors' capital. Reason being is that more than most brokers do not understand how reverse convertibles work and are only selling them because of the hefty commission.
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.
One example of an investor who lost money after buying Wells Fargo reverse convertibles is Dominic Annino. The 78-year-old invested $300,000.00 and lost money after the underlying stocks fell. Mr. Aninno filed an arbitration complaint with FINRA and alleged that the broker never fully explained the reverse convertibles to him.
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.
One example of an investor who lost money after buying Wells Fargo reverse convertibles is Dominic Annino. The 78-year-old invested $300,000.00 and lost money after the underlying stocks fell. Mr. Aninno filed an arbitration complaint with FINRA and alleged that the broker never fully explained the reverse convertibles to him.
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.
Thursday, December 6, 2012
WAS THE INLAND WESTERN REAL ESTATE INVESTMENT TRUST AN UNSUITABLE INVESTMENT?
Many investors have been calling my office and asking whether Inland Western Real Estate Investment Trust was an unsuitable investment for them. Inland Western Real Estate Investment Trust is a non-traded Real Estate Investment Trust (REIT). 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 a non-traded REIT is an unsuitable investment. Likewise, if you cannot afford a total risk of loss, then speculative non-traded REITs are unsuitable investments. The suitability problem is compounded when any investors' portfolio is concentrated in non-traded REIT investments. A rule of thumb is that no more than 10% of anyone's investment portfolio should be concentrated in real estate investments, including REIT investments, and that percentage should be far less as a person reaches retirement and advances in age, perhaps zero!
Every brokerage firm has the responsibility of "knowing the customer" and making a customer specific "suitability" determination for every investment recommendation. The "Suitability Rule," Financial Industry Regulatory Authority (FINRA) Rule 2111, requires that a firm or associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." This is a new rule but it contains the core features of the previous National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") suitability rules and codifies well-settled interpretations of those rules. Brokerage firms and their associated persons have always had the responsibility to make suitable recommendations in light of individuals in stating investment objectives and financial condition, tax status, and other relevant factors. According to FINRA, some non-traded Real Estate Investment Trust investments ("REITs") aren't suitable for anyone based on the offering terms, misrepresentations and unreasonable projections by the promoters (see FINRA News Release "FINRA Issues Investor Alert on Public Non-Traded REITs").
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 REIT investments as the 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. But these products offer little liquidity for investors who at this stage of their life are likely to need to dip into their investment savings to support their lifestyle or for medical and other emergencies. There is no public market, early redemption of shares in REITs is often very limited, and the fees associated with the sales of these products can be high and erode the total return, if they can be sold at all. Further, many of these investments do not truly generate income but make distributions with borrowed money, with newly raised capital, or by a return of principal rather than a return on investment which can stop at any time. Although non-traded REITs may offer some diversification benefits as part of a balanced portfolio, they all have underlying risk characteristics that make them unsuitable for certain investors, particularly the elderly retired investor with limited financial resources.
When any Inland Western Real Estate Investment Trust 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 and 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!
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.
Every brokerage firm has the responsibility of "knowing the customer" and making a customer specific "suitability" determination for every investment recommendation. The "Suitability Rule," Financial Industry Regulatory Authority (FINRA) Rule 2111, requires that a firm or associated person "have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer's investment profile." This is a new rule but it contains the core features of the previous National Association of Securities Dealers ("NASD") and New York Stock Exchange ("NYSE") suitability rules and codifies well-settled interpretations of those rules. Brokerage firms and their associated persons have always had the responsibility to make suitable recommendations in light of individuals in stating investment objectives and financial condition, tax status, and other relevant factors. According to FINRA, some non-traded Real Estate Investment Trust investments ("REITs") aren't suitable for anyone based on the offering terms, misrepresentations and unreasonable projections by the promoters (see FINRA News Release "FINRA Issues Investor Alert on Public Non-Traded REITs").
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 REIT investments as the 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. But these products offer little liquidity for investors who at this stage of their life are likely to need to dip into their investment savings to support their lifestyle or for medical and other emergencies. There is no public market, early redemption of shares in REITs is often very limited, and the fees associated with the sales of these products can be high and erode the total return, if they can be sold at all. Further, many of these investments do not truly generate income but make distributions with borrowed money, with newly raised capital, or by a return of principal rather than a return on investment which can stop at any time. Although non-traded REITs may offer some diversification benefits as part of a balanced portfolio, they all have underlying risk characteristics that make them unsuitable for certain investors, particularly the elderly retired investor with limited financial resources.
When any Inland Western Real Estate Investment Trust 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 and 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!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Saturday, December 1, 2012
SENIORS ARE TARGETED IN VARIABLE ANNUITY SALES NATIONWIDE
As investors age, they become more vulnerable to making errors in their finances. This is because the ability to make sound financial decisions begins to peak in one's mid-50s. For this reason, retirees should be prepared to handle the risk of diminished capacity in order to prevent predatory or fraudulent sales tactics against them before it is too late. Some precautionary measures may include preparing a will and empowering an attorney to handle healthcare and financial issues. Still, brokers are able to convince senior investors into buying variable annuities by misrepresenting the true nature and cost of the product. Variable annuities are generally unsuitable for elderly investors, particularly those over 70 years for several reasons.
An annuity is a form of insurance that offers a series of payments for a period of time. Variable annuities are typically higher in risk when compared other types of annuities and depend on how the stock market is performing. Buyers have the option to allocate the cash invested into different types of assets such as mutual funds, indices, fixed income investments or bonds, and cash. Most variable annuities do not have principal protection, so investors can lose money if markets deteriorate.
Variable annuities are also very costly to investors. An agent can collect at least 5% from the moment of sale and 0.5% or more every year for the life of the investment; variable annuities with common riders can take over 3% off annual returns. Surrender charges of as much as 9% may apply if an investor is in need of cash due to an unexpected emergency. On top of all this, insurance companies are offering Guaranteed Lifetime Withdrawal Benefits (GLWB) without clearly telling investors the costs associated with taking early distributions. GLWBs allow percentage withdrawals based on the total amount without having to annuitize the investment. The problem with GLWBs is the immense cost of withdrawal, which is hidden away from investors in the terms of the agreement.
Senior investors cannot be urged enough to find a financial advisor or broker they can trust. Unfortunately, it can be difficult for the investor to tell if the broker is acting his or her best interest when suffering a decline in mental ability. That is why senior financial advisors or investors should also employ a trustworthy and financially savvy third-party or family member to monitor a broker's recommendations, which can help prevent significant investment losses well into retirement.
Have you suffered a loss of principal in your variable annuity? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
An annuity is a form of insurance that offers a series of payments for a period of time. Variable annuities are typically higher in risk when compared other types of annuities and depend on how the stock market is performing. Buyers have the option to allocate the cash invested into different types of assets such as mutual funds, indices, fixed income investments or bonds, and cash. Most variable annuities do not have principal protection, so investors can lose money if markets deteriorate.
Variable annuities are also very costly to investors. An agent can collect at least 5% from the moment of sale and 0.5% or more every year for the life of the investment; variable annuities with common riders can take over 3% off annual returns. Surrender charges of as much as 9% may apply if an investor is in need of cash due to an unexpected emergency. On top of all this, insurance companies are offering Guaranteed Lifetime Withdrawal Benefits (GLWB) without clearly telling investors the costs associated with taking early distributions. GLWBs allow percentage withdrawals based on the total amount without having to annuitize the investment. The problem with GLWBs is the immense cost of withdrawal, which is hidden away from investors in the terms of the agreement.
Senior investors cannot be urged enough to find a financial advisor or broker they can trust. Unfortunately, it can be difficult for the investor to tell if the broker is acting his or her best interest when suffering a decline in mental ability. That is why senior financial advisors or investors should also employ a trustworthy and financially savvy third-party or family member to monitor a broker's recommendations, which can help prevent significant investment losses well into retirement.
Have you suffered a loss of principal in your variable annuity? If so, call Robert Pearce at the Law Offices of Robert Wayne Pearce, P.A. for a free consultation.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Saturday, November 17, 2012
CAN I RECOVER MY INLAND WESTERN REAL ESTATE INVESTMENT TRUST LOSSES?
Many investors in the non-traded Inland Western REIT (now known as Retail Properties of America, Inc.) have inquired about their ability to recover their losses after learning that their fund is no longer valued as much as they were previously led to believe. As a result, many claims are being filed by Inland Western REIT and other REIT investors for misrepresentation, unsuitable recommendations and/or overconcentrations of their investment funds in Inland Western REIT and other REIT investments to recover their REIT losses.
At first blush, one may think that the best claim is against the Inland Western REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Inland Western REIT and other REIT investments were recommended by your brokerage firm and financial advisor who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.
The most common misrepresentation and misleading statement claims that the Inland Western REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that Inland Western REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in Inland Western REITs and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are an Inland Western REIT investor with the same complaints, we believe we can help you recover your REIT losses!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
At first blush, one may think that the best claim is against the Inland Western REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Inland Western REIT and other REIT investments were recommended by your brokerage firm and financial advisor who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.
The most common misrepresentation and misleading statement claims that the Inland Western REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that Inland Western REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in Inland Western REITs and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are an Inland Western REIT investor with the same complaints, we believe we can help you recover your REIT losses!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Thursday, November 15, 2012
CAN I RECOVER MY INLAND AMERICAN REAL ESTATE INVESTMENT TRUST LOSSES?
Many investors in the non-traded Inland American REIT have inquired about their ability to recover their losses after learning that their fund is no longer valued as much as they were previously led to believe. As a result, many claims are being filed by Inland American and other REIT investors for misrepresentation, unsuitable recommendations and/or overconcentrations of their investment funds in Inland American and other REIT investments to recover their REIT losses.
At first blush, one may think that the best claim is against the Inland American REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Inland American REIT and other REIT investments were recommended by your brokerage firm and financial advisor who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.
The most common misrepresentation and misleading statement claims that the Inland American REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that the Inland American REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in Inland American REITs and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are an Inland American REIT investor with the same complaints, we believe we can help you recover your REIT losses!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
At first blush, one may think that the best claim is against the Inland American REIT itself and its management but one needs to remember why they first invested. Undoubtedly, the Inland American REIT and other REIT investments were recommended by your brokerage firm and financial advisor who have a fiduciary duty to not misrepresent or omit to state important facts, perform due diligence on any REIT and first make sure that the investment is suitable at all for any investor and then specifically ensure that the investment is appropriate in light of the investor's actual age, investment experience, investment objectives, tax and financial condition. If the brokerage firm and its advisor fail in fulfilling any one of these duties under common law and under the FINRA Code of Conduct, investors will have the right to recover their investment losses against them through a FINRA arbitration proceeding and/or court if no arbitration agreement has been executed.
The most common misrepresentation and misleading statement claims that the Inland American REIT and other REIT investors have been making relate to the risk associated with the non-traded REITs. Many investors have complained that the Inland American REIT and other REITs were not adequately represented before purchase and that they did not know the real truth about the valuations, performance, prospects, liquidity, or distribution and redemption practices of management relating to their investment. Many elderly investors seeking income were overconcentrated in Inland American REITs and other REITs because they needed income. Sadly they learned too late that there were no guarantees that distributions would be made. Some REIT investors have just learned that they would no longer be receiving distributions or that the distributions they actually received were derived from loans and not the true cash flow of the REIT. Brokerage firms and their financial advisors were eager to push REIT investments on their clients for the high commissions compared to other products. Unfortunately, many investors are locked in and unable to sell their REIT investments without suffering without selling into deeply discounted secondary market for some other REIT investments. If you are an Inland American REIT investor with the same complaints, we believe we can help you recover your REIT losses!
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Sunday, November 11, 2012
WATCH OUT INVESTORS--THEY ARE NOT CALLED JUNK BONDS FOR NOTHING!
Wall Street calls them "high-yield bonds" but Main Street has a better name, "junk bonds." These are long-term, interest bearing IOUs issued by companies or municipalities with poor credit ratings (indicating an inability to pay those IOUs) or none at all! These bonds pay high yields for one and only one reason-it's the only way to get investors to buy them. Apparently, many investors have forgotten who popularized them in the 1980s, Drexel-Burnham and Michael Milken, a bankrupt brokerage and felon, respectively.
High-yield (junk) municipal bonds have attracted about $5.3 billion of investors' money so far this year, but some experts think that their party is about to end. The reason for the robust growth is that the yield of junk municipal bonds is approximately 5.2 percent compared with investment grade munis that are yielding 2 percent. Similarly, the total return of one junk municipal bond ETF is 9.8 percent compared with 6.9 percent for an investment-grade muni bond ETF. While the increased yield is attractive to investors, the difference in performance is not enough to compensate for the additional risk, according to some experts ("Will 'Junk' Munis Bite Back?" by Ben Levisohn, Wall Street Journal).
The risk of high-yield (junk) munis is significant. The stagnant U.S. economy means lower tax revenues, which is putting severe stress on municipal budgets. On top of that, states, suffering from lower tax revenues, are likely to continue cutting funding to local governments. If these stresses reach a tipping point, there may be a run out of junk municipal bonds and funds as the herd stampedes into safer investment-grade municipal bonds.
One reason for the flow of investor funds into junk municipal bonds is that municipalities have been refinancing older bonds at record levels. Investors looking for the same yield must go toward the junk end of the spectrum to find it. But the spread - the difference between the yields of junk and investment grade - is narrowing. This has experts worried that the end is near for the rally into junk municipal bonds.
High-yield (junk) munis that back ancillary projects such as nursing homes and hospitals are generally even more risky because they are not general obligation bonds that are backed by the taxing powers of the city, county or state.
Defaults have been relatively rare but could increase, especially as state governments cut local government funding. The article notes that Detroit came within days of a default, leading a rating agency to cut Detroit's debt rating on June 12.
In sum, more advisers are recommending that junk muni bond investors should get out now while the getting is good. "The weak are getting weaker. This is a great time for an upgrade," one money manager was quoted as saying.
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.
High-yield (junk) municipal bonds have attracted about $5.3 billion of investors' money so far this year, but some experts think that their party is about to end. The reason for the robust growth is that the yield of junk municipal bonds is approximately 5.2 percent compared with investment grade munis that are yielding 2 percent. Similarly, the total return of one junk municipal bond ETF is 9.8 percent compared with 6.9 percent for an investment-grade muni bond ETF. While the increased yield is attractive to investors, the difference in performance is not enough to compensate for the additional risk, according to some experts ("Will 'Junk' Munis Bite Back?" by Ben Levisohn, Wall Street Journal).
The risk of high-yield (junk) munis is significant. The stagnant U.S. economy means lower tax revenues, which is putting severe stress on municipal budgets. On top of that, states, suffering from lower tax revenues, are likely to continue cutting funding to local governments. If these stresses reach a tipping point, there may be a run out of junk municipal bonds and funds as the herd stampedes into safer investment-grade municipal bonds.
One reason for the flow of investor funds into junk municipal bonds is that municipalities have been refinancing older bonds at record levels. Investors looking for the same yield must go toward the junk end of the spectrum to find it. But the spread - the difference between the yields of junk and investment grade - is narrowing. This has experts worried that the end is near for the rally into junk municipal bonds.
High-yield (junk) munis that back ancillary projects such as nursing homes and hospitals are generally even more risky because they are not general obligation bonds that are backed by the taxing powers of the city, county or state.
Defaults have been relatively rare but could increase, especially as state governments cut local government funding. The article notes that Detroit came within days of a default, leading a rating agency to cut Detroit's debt rating on June 12.
In sum, more advisers are recommending that junk muni bond investors should get out now while the getting is good. "The weak are getting weaker. This is a great time for an upgrade," one money manager was quoted as saying.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Wednesday, November 7, 2012
WATCH OUT FLORIDA SENIORS--MORE SWINDLERS THAN EVER WILL PREY ON YOUR GOLDEN YEARS
Senior citizens lose about $2.9 billion annually to scams and other abuses, according to Don Blandin, president and chief executive of Investor Protection Trust, (See "Survey reveals alarming rise in financial abuse of the elderly"), citing a June 2001 study by MetLife Inc. The number of financial scams targeting seniors is dramatically increasing according to the survey conducted by the non-profit Investor Protection Trust.
Financial advisers "have a duty and responsibility to report [abuse] to the authorities, and they have some personal liability if they don't," said Robert Lam, chairman of the Investor Protection Institute and chairman of the Pennsylvania Securities Commission. Lam added: "The results are often devastating, depriving older Americans of the opportunity to enjoy their golden years."
Family members and professionals also need to remain sensitive to a relative's or a client's deteriorating abilities and, when appropriate, take action to protect that person from becoming a victim of financial abuse. Family members, investment advisers and brokers are often the first to notice if their relative or client is declining mentally. In addition to apparent deterioration of memory and cognitive abilities, warning signs may include failure to pay bills, unusual risk taking and abruptly ceding control of their finances. It is very sad to see a lifetime of hard work disappear at the hands of a scam artist.
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.
Financial advisers "have a duty and responsibility to report [abuse] to the authorities, and they have some personal liability if they don't," said Robert Lam, chairman of the Investor Protection Institute and chairman of the Pennsylvania Securities Commission. Lam added: "The results are often devastating, depriving older Americans of the opportunity to enjoy their golden years."
Family members and professionals also need to remain sensitive to a relative's or a client's deteriorating abilities and, when appropriate, take action to protect that person from becoming a victim of financial abuse. Family members, investment advisers and brokers are often the first to notice if their relative or client is declining mentally. In addition to apparent deterioration of memory and cognitive abilities, warning signs may include failure to pay bills, unusual risk taking and abruptly ceding control of their finances. It is very sad to see a lifetime of hard work disappear at the hands of a scam artist.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Tuesday, November 6, 2012
FLORIDA RETIREES--BE CAREFUL WITH LUMP SUM RETIREMENT PAYMENTS
Hundreds of thousands of retirees are likely to face a choice of taking a lump sum retirement payment or company sponsored retirement annuity over the next few years. That decision could improve the retiree's financial situation or result in significant losses with no realistic possibility of recovery. Offers like those call for careful study and analysis by qualified and unconflicted advisers. Unfortunately, in the past, retirees have often fallen victim to bad advice from unscrupulous or incompetent advisers.
Ford Motor Co. recently offered 90,000 of its retirees a single lump sum payment that would take the place of their company-sponsored retirement annuity, which pays the retiree a guaranteed amount of income for life. General Motors plans to make the same kind of offer to 42,000 of its retirees. Other companies with billions of dollars in pension assets are expected to follow suit.
For Ford and GM, it boils down to this: Given the uncertainties regarding the adequacy of contributions, investment performance, and longevity (the number of years the plan must pay out), there is a risk that the plan's assets will be insufficient to cover the payout obligations. Ford and GM want to transfer the risk to the retiree, and they are willing to pay a price - the lump sum - that they have determined to be the discounted value of their future payment obligations.
But is it a good deal for the retirees? In computing lump sum offers, companies with defined benefit plans like Ford and GM are required by law to use a discount rate derived from long-term corporate bond yields. That yield is now about 4.20 percent. Until this year, however, those companies were required to use the yield of comparable Treasury securities, now about 2.8 percent. The difference would save Ford and GM (and cost retirees) a good deal of money, as the lower the discount rate, the lower the lump sum payments to retirees.
A lump sum payment could still make sense under certain circumstances. One's age and health, for example, are key factors. Both the retiree and the company are playing the longevity game. The company is focused on statistical life expectancy of a large group. The retiree is focused on one or perhaps two life expectancies - the retiree's and the spouse's, who may receive some payments after the death of the retiree. If a retiree accepts the lump sum and dies the next day, he or she "wins" the game. If that same retiree lives a long life, the winner is less clear. There may even be a perfect pinpoint balance where both parties win.
Another key consideration is investment risk. It is a common rule of thumb that if one withdraws 4 percent or less of savings per year, the odds of outliving one's assets is very low (but some say that withdrawal rate is too high). Very low is good, but that is a long way from guaranteed for life.
There is another consideration for retirees under the age of 59 ½. The lump sum is usually rolled over into an IRA. The IRS imposes an additional 10 percent tax on distributions taken from a retirement plan or IRA before age 59 ½. There is an exception to the 10 percent tax if distributions are made as part of a series of substantially equal periodic payments over the participant's life expectancy. Investors run into problems with the exception when investment losses lead them to modify or stop the distributions. If that happens, other than for reason of death or disability, within 5 years of the first payment, or, if later, age 59 ½, the exception to the 10 percent tax does not apply.
In making this potentially life-changing decision, there are a number of factors - both pro and con - that need to be considered. Financial advisers who would advise a retiree and/or manage the retiree's money, however, have interests that inherently conflict with the retiree's interests. The adviser has a financial interest is gathering assets on which to earn a fee, and that interest is best served by explaining the pros but not the cons of taking the lump sum and investing it with the adviser. That interest conflicts with the retiree's interest in understanding and considering the reasons why he or she may be better off keeping the annuity.
Financial advisers are certainly not the only advisers who must deal with inherent conflicts of interest. Like every other group of people, they cover the spectrum from honest and wise to unscrupulous and foolish, and all shades in between. It is important to know with whom you are dealing.
Retirees should be especially wary of unsolicited advice, advisers recommended by the company, and advisers giving investment advice at free lunch or dinner seminars. Keep in mind that a financial adviser with an interest in earning a fee from providing financial advice or management may promise the moon. Be skeptical. If possible, have a disinterested professional (e.g. maybe an accountant, attorney, independent financial adviser, etc.) evaluate the lump sum offer, as well as any proposed investments and projected rate of return.
A good starting point to find a trustworthy financial adviser is to ask other competent, unconflicted professionals for several recommendations.
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.
Ford Motor Co. recently offered 90,000 of its retirees a single lump sum payment that would take the place of their company-sponsored retirement annuity, which pays the retiree a guaranteed amount of income for life. General Motors plans to make the same kind of offer to 42,000 of its retirees. Other companies with billions of dollars in pension assets are expected to follow suit.
For Ford and GM, it boils down to this: Given the uncertainties regarding the adequacy of contributions, investment performance, and longevity (the number of years the plan must pay out), there is a risk that the plan's assets will be insufficient to cover the payout obligations. Ford and GM want to transfer the risk to the retiree, and they are willing to pay a price - the lump sum - that they have determined to be the discounted value of their future payment obligations.
But is it a good deal for the retirees? In computing lump sum offers, companies with defined benefit plans like Ford and GM are required by law to use a discount rate derived from long-term corporate bond yields. That yield is now about 4.20 percent. Until this year, however, those companies were required to use the yield of comparable Treasury securities, now about 2.8 percent. The difference would save Ford and GM (and cost retirees) a good deal of money, as the lower the discount rate, the lower the lump sum payments to retirees.
A lump sum payment could still make sense under certain circumstances. One's age and health, for example, are key factors. Both the retiree and the company are playing the longevity game. The company is focused on statistical life expectancy of a large group. The retiree is focused on one or perhaps two life expectancies - the retiree's and the spouse's, who may receive some payments after the death of the retiree. If a retiree accepts the lump sum and dies the next day, he or she "wins" the game. If that same retiree lives a long life, the winner is less clear. There may even be a perfect pinpoint balance where both parties win.
Another key consideration is investment risk. It is a common rule of thumb that if one withdraws 4 percent or less of savings per year, the odds of outliving one's assets is very low (but some say that withdrawal rate is too high). Very low is good, but that is a long way from guaranteed for life.
There is another consideration for retirees under the age of 59 ½. The lump sum is usually rolled over into an IRA. The IRS imposes an additional 10 percent tax on distributions taken from a retirement plan or IRA before age 59 ½. There is an exception to the 10 percent tax if distributions are made as part of a series of substantially equal periodic payments over the participant's life expectancy. Investors run into problems with the exception when investment losses lead them to modify or stop the distributions. If that happens, other than for reason of death or disability, within 5 years of the first payment, or, if later, age 59 ½, the exception to the 10 percent tax does not apply.
In making this potentially life-changing decision, there are a number of factors - both pro and con - that need to be considered. Financial advisers who would advise a retiree and/or manage the retiree's money, however, have interests that inherently conflict with the retiree's interests. The adviser has a financial interest is gathering assets on which to earn a fee, and that interest is best served by explaining the pros but not the cons of taking the lump sum and investing it with the adviser. That interest conflicts with the retiree's interest in understanding and considering the reasons why he or she may be better off keeping the annuity.
Financial advisers are certainly not the only advisers who must deal with inherent conflicts of interest. Like every other group of people, they cover the spectrum from honest and wise to unscrupulous and foolish, and all shades in between. It is important to know with whom you are dealing.
Retirees should be especially wary of unsolicited advice, advisers recommended by the company, and advisers giving investment advice at free lunch or dinner seminars. Keep in mind that a financial adviser with an interest in earning a fee from providing financial advice or management may promise the moon. Be skeptical. If possible, have a disinterested professional (e.g. maybe an accountant, attorney, independent financial adviser, etc.) evaluate the lump sum offer, as well as any proposed investments and projected rate of return.
A good starting point to find a trustworthy financial adviser is to ask other competent, unconflicted professionals for several recommendations.
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, November 4, 2012
SELLING EQUITY INDEXED ANNUITIES TO 80 YEAR OLDS? GO TO JAIL!
The Wall Street Journal reported that a California insurance agent, who sold an equity indexed annuity to an 83-year old woman with dementia, has been convicted of felony theft and ordered to serve 90 days in jail. Glenn Neasham, who once enjoyed an annual income of $500,000 from selling such products, now seeks donations to pay his legal fees. According to Robert Pearce, a securities attorney, "Anyone who sells equity indexed annuities to 80-year olds should go directly to jail!"
An equity indexed annuity is a complex, illiquid financial product that most experts agree is unsuitable for an 83 year old. Should the policy holder need to access her invested principal in the first few years of the policy, to meet medical expenses for instance, she would be hit with surrender charges - 12.5% of the principal amount during the first year, according to Allianz, the issuer of the policy.
In this case, bank officials notified California's adult-protection officials when the octogenarian, accompanied by a male friend, sought to withdraw $175,000 from her bank account to purchase the annuity. Bank officials said the woman seemed confused and influenced by the male companion.
The octogenarian was too ill to appear at the criminal trial of Mr. Neasham. The district attorney presented evidence that she was not mentally competent to consent to the transaction and that Mr. Neasham knew this at the time of sale. The district attorney also presented evidence that a $14,000 (or 8 percent) commission "played into his criminal intent."
A conservator has since been appointed and Allianz agreed to waive the surrender charge and return the octogenarian's principal with interest.
Sales of equity indexed annuities grew to $32.2 billion in 2011. Agents quoted in the article all agreed, however, that the criminal conviction will have a chilling effect and change their sales practices. One said that the case will be "in the back of my mind" when considering selling these products to elderly people, and "more than ever, I'd be willing to walk away from a sale." ("Annuity Case Chills Agents," Wall Street Journal).
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
An equity indexed annuity is a complex, illiquid financial product that most experts agree is unsuitable for an 83 year old. Should the policy holder need to access her invested principal in the first few years of the policy, to meet medical expenses for instance, she would be hit with surrender charges - 12.5% of the principal amount during the first year, according to Allianz, the issuer of the policy.
In this case, bank officials notified California's adult-protection officials when the octogenarian, accompanied by a male friend, sought to withdraw $175,000 from her bank account to purchase the annuity. Bank officials said the woman seemed confused and influenced by the male companion.
The octogenarian was too ill to appear at the criminal trial of Mr. Neasham. The district attorney presented evidence that she was not mentally competent to consent to the transaction and that Mr. Neasham knew this at the time of sale. The district attorney also presented evidence that a $14,000 (or 8 percent) commission "played into his criminal intent."
A conservator has since been appointed and Allianz agreed to waive the surrender charge and return the octogenarian's principal with interest.
Sales of equity indexed annuities grew to $32.2 billion in 2011. Agents quoted in the article all agreed, however, that the criminal conviction will have a chilling effect and change their sales practices. One said that the case will be "in the back of my mind" when considering selling these products to elderly people, and "more than ever, I'd be willing to walk away from a sale." ("Annuity Case Chills Agents," Wall Street Journal).
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
Tuesday, October 30, 2012
SENIOR INVESTORS THROUGHOUT FLORIDA AND NATIONWIDE--YOU ARE TARGETS!
"Complaints [involving seniors and financial scammers] are rising," according to Jack Herstein, president of the North American Securities Administrators Association (NASAA) and assistant director of the Nebraska securities regulator. Mr. Herstein added that the increased number of complaints is partly responsible for the increased number of enforcement actions. The association of state securities regulators reportedly filed 1,241 such enforcement actions in 2010, the latest year for which data has been compiled - more than double the 506 enforcement actions filed in 2009 ("Financial Scammers Prey on Seniors," by Anne Teresen, Wall Street Journal).
Unfortunately, older people make attractive targets for investment scams, in part, because they often have more investable assets, and are more susceptible to sales pitches due to factors associated with aging, such as loneliness and cognitive disabilities, according to the article.
Seniors who must rely on a fixed income to meet expenses may experience financial hardship as a result of today's ultralow interest rates and poor investment returns. They are, therefore, more inclined to be lured by promises of higher returns and private (Reg D) investments, which are often promoted as being stable-value investments - i.e., not correlated with the price movements of traditional stocks and bonds.
Since private (Reg D) investments are unregistered and virtually unregulated, it is easy for scam artists to peddle fraudulent securities that promise attractive returns. State enforcement actions involving unregistered securities, including promissory notes and private placements, exceed those involving traditional stock and bond investments by a factor of five to one, according to NASAA.
In addition to outright fraud, NASAA is seeing more cases of unsuitable investment recommendations being made to those over the age of 50. Examples of unsuitable products include variable annuities, which impose substantial "surrender" charges on investors who seek to liquidate their investments within a set number of years of the purchase date.
"Someone who is 85 should not be sold a variable annuity with a 15-year surrender charge. That's not suitable," Mr. Herstein was quoted as saying.
Elderly victims of financial abuse lost $2.9 billion in 2010, up 12% from $2.6 billion in 2008, according to the article, citing a study by MetLife Mature Market Institute. "[M]any of these cases go unreported," Institute director Sandra Timmermann was quoted as saying.
Adult children are often in the best position to recognize potential investment fraud and take preventive or corrective action. It may be beneficial for seniors to sign up for the National Do Not Call Registry (888-382-1222) in order to minimize unsolicited calls from potential scammers. What to do with the telemarketing calls that make it through anyway? Just hang up on them - without saying a word. Zero tolerance for unsolicited sales calls is the best policy.
Depending on the circumstances, adult children may offer to monitor a parent's bank, brokerage and credit-card statements. "You might volunteer to help a parent go through the bills," Ms. Timmermann was quoted as saying. (On the other hand, the financial abuser is sometimes an adult child, so this can be a complicated, touchy subject.)
Unpaid bills, an increase in the use of ATM or credit cards, or disappearing valuables are red flags that may signal a serious problem, according to the article.
For more information, the article refers those who suspect financial abuse to www.eldercare.gov, 800-677-1116 for a referral to adult protective services, local police departments, and state securities regulators, which can be found at www.nasaa.org.
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.
Unfortunately, older people make attractive targets for investment scams, in part, because they often have more investable assets, and are more susceptible to sales pitches due to factors associated with aging, such as loneliness and cognitive disabilities, according to the article.
Seniors who must rely on a fixed income to meet expenses may experience financial hardship as a result of today's ultralow interest rates and poor investment returns. They are, therefore, more inclined to be lured by promises of higher returns and private (Reg D) investments, which are often promoted as being stable-value investments - i.e., not correlated with the price movements of traditional stocks and bonds.
Since private (Reg D) investments are unregistered and virtually unregulated, it is easy for scam artists to peddle fraudulent securities that promise attractive returns. State enforcement actions involving unregistered securities, including promissory notes and private placements, exceed those involving traditional stock and bond investments by a factor of five to one, according to NASAA.
In addition to outright fraud, NASAA is seeing more cases of unsuitable investment recommendations being made to those over the age of 50. Examples of unsuitable products include variable annuities, which impose substantial "surrender" charges on investors who seek to liquidate their investments within a set number of years of the purchase date.
"Someone who is 85 should not be sold a variable annuity with a 15-year surrender charge. That's not suitable," Mr. Herstein was quoted as saying.
Elderly victims of financial abuse lost $2.9 billion in 2010, up 12% from $2.6 billion in 2008, according to the article, citing a study by MetLife Mature Market Institute. "[M]any of these cases go unreported," Institute director Sandra Timmermann was quoted as saying.
Adult children are often in the best position to recognize potential investment fraud and take preventive or corrective action. It may be beneficial for seniors to sign up for the National Do Not Call Registry (888-382-1222) in order to minimize unsolicited calls from potential scammers. What to do with the telemarketing calls that make it through anyway? Just hang up on them - without saying a word. Zero tolerance for unsolicited sales calls is the best policy.
Depending on the circumstances, adult children may offer to monitor a parent's bank, brokerage and credit-card statements. "You might volunteer to help a parent go through the bills," Ms. Timmermann was quoted as saying. (On the other hand, the financial abuser is sometimes an adult child, so this can be a complicated, touchy subject.)
Unpaid bills, an increase in the use of ATM or credit cards, or disappearing valuables are red flags that may signal a serious problem, according to the article.
For more information, the article refers those who suspect financial abuse to www.eldercare.gov, 800-677-1116 for a referral to adult protective services, local police departments, and state securities regulators, which can be found at www.nasaa.org.
The most important of investors' rights is the right to be informed! This Investors' Rights blog post is by the Law Offices of Robert Wayne Pearce, P.A., located in Boca Raton, Florida. For over 30 years, Attorney Pearce has tried, arbitrated, and mediated hundreds of disputes involving complex securities, commodities and investment law issues. The lawyers at our law firm are devoted to protecting investors' rights throughout the United States and internationally! Please visit our website, www.secatty.com, post a comment, call (800) 732-2889, or email Mr. Pearce at pearce@rwpearce.com for answers to any of your questions about this blog post and/or any related matter.
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