Free Attorney Consultation

   877.821.5550    Email
Hablamos Español (pregunte por Cindy)

Fight Investment Fraud

Greco & Greco's lawyers represent investors to recover losses caused by securities fraud, churning, lack of suitability, negligence, sales of unregistered securities, unauthorized trading, and other misconduct by stock brokers, investment advisors, financial planners and their firms.

FINRA recently fined Northern Trust Securities Inc. $600,000 for supervisory failures related to sales of Collateralized Mortgage Obligations (CMOs) to customers.  As set out in this FINRA release:  “from October 2006 through October 2009, Northern Trust failed to monitor customer accounts for potentially unsuitable levels of concentration in CMOs, in large part because it used an exception reporting system that failed to capture or analyze substantial portions of the firm?s business, including all CMO transactions, certain trades of 10,000 equity shares or more, and certain trades of 250 or more of fixed-income bonds.”

The Letter of Acceptance, Waiver, and Consent which can be found on the FINRA website discusses the risks of CMO’s and states that the flaw in the system was first raised in an arbitration filed by an investor who had almost 50% of her total liquid net worth invested in a Countrywide CMO that had lost significant value.

If you have incurred losses from CMOs which were unsuitable for you or were overconcentrated, or if you are the victim of other broker misconduct and you would like to discuss legal options with an attorney, please contact Greco & Greco for a free consultation with one of our lawyers.

The SEC recently launched its webpage for the Office of the Whistleblower, an office created by the Dodd-Frank Wall Street Reform and Consumer Protection Act.  (Click here for the site.)  In the words of the SEC Whistleblower Chief Sean McKessy, the goal of the program is to “incentivize you to report possible violations of the US securities laws of which you become aware.”  The site contains a FAQ section, links to the SEC Rules regarding whistleblowers, and Form TCR (Tip, Complaint, or Referral) to be used to submit a tip.

If you are a witness to information regarding a possible securities fraud, contact one of Greco & Greco’s attorneys here for a free consultation to discuss your options.

Earlier this year, FINRA (the Financial Industry Regulatory Authority) implemented a change to its arbitration system which has been sought by the Claimants’ bar for years.  As set out in this notice, customer Claimants in FINRA arbitrations now have the choice to have their disputes with their stock brokers and brokerage firms heard by three public arbitrators for cases over $100,000.00. 

Under the previous FINRA Rule, three arbitrator panels were required to include one “non-public” or “industry” arbitrator, i.e. someone currently employed in the securities industry or with present or former ties to the industry.  The securities industry requires that customers arbitrate their disputes with their brokerage firms through FINRA, and virtually all new account forms from U.S. brokerage firms contain a mandatory arbitration clause.  Greco & Greco regularly represents customers in FINRA arbitrations - if you would like to discuss a potential claim with one of our attorneys, please Contact Us.

The Receiver appointed by the US District Court in Florida regarding the case against Kenneth Wayne McLeod and the Federal Employee Benefits Group Bond Fund (FEBG) has filed his initial report to the Court.  It can be found here.  Although the receiver is in the process of reviewing hundreds of boxes of documents, the initial findings regarding assets are not promising.  Reference is made to five pieces of real estate, but the amount of equity, if any, in the properties is unclear.  Furthermore, the bank and brokerage accounts found and frozen at this time only account for approximately $90,000.  The ponzi scheme allegedly involved over $34,000,000 invested by mostly government employees.

In his report, the Receiver encourages victims to contact their own attorneys to discuss potential claims against third parties.  As set out in our previous blog post, Mr. McLeod was a FINRA registered representative of Lincoln Financial Securities Corporation until May, 2010.  Prior to Lincoln, Mr. McLeod was FINRA registered with Capital Analysts, Incorporated and Washington Square Securities.  FINRA firms have legal responsibilities to supervise their registered representatives, and further may be found liable for the wrongful actions of their agents. If you are a victim of the FEBG bond fund ponzi scheme, and you would like to discuss legal options with an attorney, please contact Greco & Greco for a free consultation with one of our lawyers.

Medical Capital Holdings is another private placement investment that has been subject to claims of fraud by the SEC.  In the Amended Complaint found on the Receivership site the SEC alleges that despite promises in the offering memoranda from Medical Capital not to use investor funds to pay administrative fees, 24% of investor funds were paid out as administrative fees, and the companies engaged in sham intercompany transactions to pay back principal and interest to investors in prior offerings. 

Furthermore, as set out in this Orange County Register article, the head of Medical Capital (Sidney Field) had previously had his insurance license revoked by California, had been sued twice by state insurance regulators for racketeering and fraud, and had filed bankruptcy.

Investors who were sold these offerings by their stock brokers and have suffered losses may have claims that they can bring in FINRA arbitrations against their brokerage firms.  Firms selling such offerings have due diligence duties prior to approval of their sale, and representatives are required to only make suitable recommendations to their customers.  Additionally, representatives may not misrepresent the risk of securities they recommend, and they must disclose material facts related to risk.  Greco & Greco is pursuing claims in arbitration on behalf of customers who were sold these products.  If you think you may have a claim, please contact us for a free consultation with one of our attorneys.

According to this Western District of North Carolina Department of Justice release, Sidney Hanson of Charlotte, North Carolina pleaded guilty in July, 2009 to securities fraud, mail fraud, and money laundering in relation to an investment scheme known as Queen Shoals.  The SEC has also filed a Complaint related to the investment scheme.

The SEC states in the above Complaint that the Hansons and their sales force sold almost $33 million in “private loan agreements” to investors around the country.  The investments were allegedly to be placed in a diversified portfolio? of precious metals, foreign currency and treasury notes, generating high returns while remaining safe in non-depletion accounts.  In reality according to the SEC, the investment funds were invested “in a number of very risky private investment opportunities” and funds from new investors were used to pay off old investors.

Investors who were sold Queen Shoals investments by their stockbrokers, investment advisers, retirement specialists, or financial planners may have claims to be brought against related firms based on securities fraud, suitability, failure to do due diligence, misrepresentations and omissions, and other legal grounds.  Greco & Greco is currently investigating sales by FINRA registered parties in Virginia - please contact us for a free consultation if you believe you may have a claim.

As set out in this SEC Release, Provident Royalties, LLC and many related entities (including Shale Royalties entities) have been charged with engaging in a $485 million offering fraud and orchestrating a ponzi scheme.  According to the SEC’s Complaint and release, “Provident falsely promised yearly returns of up to 18 percent,” and used investor funds from later offerings to pay “expenses related to earlier offerings and returns to investors in those offerings.”  Unaffiliated brokerage firms were solicited by Provident to sell the investments through placement agreements for each offering, thereby selling the investments to retail investors nationwide.

Investors who were sold these offerings by their stock brokers and have suffered losses may have claims that they can bring in FINRA arbitrations against their brokerage firms.  Firms selling such offerings have due diligence duties prior to approval of their sale, and representatives are required to only make suitable recommendations to their customers.  Additionally, representatives may not misrepresent the risk of securities they recommend, and they must disclose material facts related to risk.  Greco & Greco is pursuing claims in arbitration on behalf of customers who were sold these products.  If you think you may have a claim, please contact us for a free consultation with one of our attorneys.

As discussed in this Bloomberg article, the settlements reached by regulators regarding auction rate securities sales with many of the large brokerage firms fail to help medium to large businesses who were also sold ARS.  Although the required buyouts in the settlements with UBS, JPMorgan Chase, Morgan Stanley, and Wachovia Corp. reached $35 billion, this amount only approximates 18% of the $200 billion estimated to be still outstanding. 

Although the settlements call for the firms to use their best efforts to help institutional investors stuck with the frozen ARS, they fall short of requiring a buyback.  This situation may force mid-sized to large companies to seek redress on their own through the arbitration or court system.  Please contact Greco & Greco if your business is holding frozen ARS as a result of fraudulent sales practices of a brokerage firm.

As set out in this Kansas City Star article Wachovia and JP Morgan Chase have joined UBS, Morgan Stanley, and Citigroup in settling charges related to their sale of Auction Rate Securities.  Although the settlement agreements with exact details are not completed, it appears that the firms will be buying back frozen auction rate securities sold to individuals and small businesses.
Left open is the recovery of consequential damages suffered by buyers of the allegedly liquid ARS who couldn’t access their cash.  The press releases and articles related to the settlements reference that customers will be able to seek recovery of their consequential damages through arbitration, with the firms admitting liability, but not conceding damages. 
If you or your business suffered monetary damages as a result of having your funds frozen in ARS, please contact Greco & Greco for a free consultation with one of our attorneys to discuss options for recovery of your damages.

According to this Bloomberg article, only 3 billion of the 85 billion in outstanding student loan Auction Rate Securities have been refinanced to date.  Furthermore, due to these securities’ low interest rates, the prospects for an immediate solution are bleak.  The article further reported that approximately two-thirds of publicly traded companies that are holding student loan auction rate securities have marked down the value of the securities, sometimes as much as 35%.

If you were sold student loan auction rate securities by a brokerage firm who represented that they were safe and/or liquid, and you would like to discuss your legal options, please contact Greco & Greco for a free consultation with one of our attorneys.

According to this Wall Street Journal article, federal prosecutors in New York are investigating sales of auction rate securities by two former Credit Suisse brokers.  According to the article, the investigation allegedly involves representations made that the auction rate securities were backed by student loans, when in fact they were actually backed by CDO’s (collateralized debt obligations).  This appears to be the first reported criminal investigation related to Auction Rate Securities Sales.

If you are an investor stuck with Auction Rate Securities, and you would like a free consultation to discuss your legal options with an attorney, please contact Greco & Greco.

The State of Massachusetts filed a Complaint today against UBS claiming UBS engaged in fraud and dishonest and unethical conduct with regard to its sales of Auction Rate Securities (ARS).  Link to Complaint and Exhibits.  In a 101 page Complaint, Massachusetts references voluminous emails it obtained from UBS supporting its claims, and further charges UBS with books and records violations for failures to produce additional documents.

The Complaint describes UBS’s “all-out” effort to market ARS, and especially “troubled student loan-backed auction rate certificates,” to offset increasing inventory from corporate investors who were selling the ARS due to concerns about the market.  Despite awareness of serious problems with the market, UBS was initiating conference calls in August 2007 with its financial advisors to encourage the sale of ARS to retail clients and “unload this paper.”

The Complaint further describes the incredible conflicts of interest surrounding the market:  “by setting up a situation where it was actively controlling whether auctions would clear and what rate they would clear at, UBS had (unbeknownst to its customers) set up a situation which put it in a fundamentally conflicted role between its desire to keep its underwriting clients happy with the promise of low financing costs and its “moral obligation” to retail customers to keep the auctions it had set up afloat.”

If you are an investor stuck with Auction Rate Securities, and you would like a free consultation to discuss your legal options with an attorney, please contact Greco & Greco.

In this Barron’s article, the author sets out one of the more complete analyses we have seen regarding the various types of frozen Auction Rate Securities, and their likelihood (or unlikelihood) of being redeemed or sold in the future.  The various types of ARS reviewed in the article include Municipal Issuers, Taxable Closed-End Funds, Municipal Closed-End Funds, Student Loans, and Collateralized Debt Obligations (CDO).

According to the article, the bleakest outlook is seen for the ARS backed by Student Loan Funds and CDOs which comprise about one-third of the ARS market ($105 billion of the $333 billion market).  Only about $1 billion of the $85 billion in student loan ARS have been refinanced to date due to high refinancing costs and little incentive to refinance the comparatively low rates these ARS are paying.

The Collateralized Debt Obligation ARS are an even thornier issue.  The Barron’s article states that the $20 billion in these ARS won’t be redeemed and that some may have invested in subprime mortgage securities.  The chart at the end of the article estimates the market price of these securities at 50 cents on the dollar.

Many brokerage firms marketed and sold ARS to investors as safe, liquid alternatives to money market funds.  If you are stuck with frozen ARS and you would like a free consultation to discuss your legal options with an attorney, please contact Greco & Greco.

The Missouri Higher Education Loan Authority announced this week that it would begin buying back a portion of its auction rate securities at a discount on the Restricted Securities Trading Network.  See the related news stories in Forbes and the St. Louis Business Journal

This news is a mixed blessing for investors stuck with these or other auction rate securities.  While such a buy-back will finally allow them to escape from these investments, they will probably have to take a loss on the investment if it is bought back at a discount on a secondary market.  Many investors around the country were sold auction rate securities by major brokerage firms who incorrectly claimed they were safe, liquid, cash equivalents.  This has turned out to not be the case as evidenced by the collapse of the auction markets earlier this year.  Such sales practices can form the basis for claims of federal and state securities fraud among other causes of action.

If you are an investor who was sold Auction Rate Securities, and you would like to discuss your legal options with an attorney, please Contact Greco & Greco.

Morgan Stanley was fined $3 million and forced to pay $9.5 million in restitution to arbitration Claimants as a result of its failure to produce emails in response to document requests in arbitrations with customers.  According to the FINRA press release, Morgan Stanley incorrectly represented in the arbitration proceedings that “the destruction of the firm’s email servers in the Sept. 11, 2001 terrorist attacks on New York’s World Trade Center resulted in the loss of all pre-9/11 email.”

The unknown at this point is the amount of financial benefit gained by Morgan Stanley by this behavior through arbitration settlements and awards, and whether this benefit far exceeds the relatively small punishment ordered by FINRA.

Toll-free
Fax
703.893.9377
Local Phone
Address
1300 Old Chain Bridge Road
McLean, VA 22101

Representing Harmed Investors Nationwide

Although Greco & Greco is based in the Mid-Atlantic Region, our attorneys represent harmed investors against their stockbrokers and financial advisors Nationwide. For promising cases, we will fly to meet with potential clients at our own cost.