Investor Lawyers Blog

OppenheimerFunds, Franklin Templeton Sue Over Puerto Rican Debt Law

Published on: July 2, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Investment firms OppenheimerFunds Inc. and Franklin Templeton (BEN) have filed a lawsuit claiming that Puerto Rico’s new law, which lets certain government agencies restructure their debt, violates the constitution. Lawmakers in Puerto Rico approved the bill last month.

Aside from its power agencies, the entities that would be allowed to restructure the debt under the new law include Puerto Rico’s water and transportation agencies. Collectively, all of the agencies have about $19.4 billion in outstanding bonds. The Act does not have provisions for restructuring tax-backed bonds and general-obligation bonds.

The two fund managers together hold about $1.7 billion in Puerto Rico Electric Power Authority debt. They want the legislation, known as the Public Corporations Debt Enforcement and Recovery Act, blocked.

US Supreme Court Will Hear Appeal Over Libor Antitrust Claims

Published on: July 2, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The United States Supreme Court has agreed to hear an appeal in Ellen Gelboim et al v. Bank of America Corp. The lawsuit was filed by bond investors who lost money in securities tied to the London Interbank Offered Rate and the manipulation of the global benchmark interest rate. Now, the nation’s highest court is granting their request to let their claims go forward and will hold oral arguments on the lawsuit during its next term.

For the last three years, different kinds of investors have filed numerous securities fraud cases against the largest banks in the world claiming that they manipulated Libor. Last year, a district court judge allowed investors to pursue certain claims but threw out their antitrust claims.

Judge Naomi Reice Buchwald said that the settling of Libor was not competitive but, rather, cooperative; it involved banks providing data to a trade group that established the rate. Plaintiffs therefore could not prove that anticompetitive behavior harmed them.

Broker Fraud: Ex-Investors Capital Rep. is Indicted in Ponzi Scheme, Credit Suisse Sues Two Ex-Brokers Over Client Data Theft, and SEC Files More Insider Trading in IBM-SPSS Acquisition

Published on: July 1, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Ex-Investors Capital Rep. Charged in $2.5M Ponzi Scam

Patricia S. Miller, a former Investors Capital Corp. representative, has been indicted on charges that she ran a $2.5 million investment fraud. She is accused of promising clients high yields for placing funds in “investment clubs.” Miller allegedly took this money and either gambled it away or used it to pay for her own spending.

According to prosecutors in Massachusetts, alleged fraud took place from 2002 through May 2014. Investors Capital fired Miller last month. Her BrokerCheck Report notes that the independent broker-dealer let her go because she allegedly misappropriated funds, borrowed client money, generated false documents, and engaged in “fraudulent investment activity.” Miller is charged with five counts of wire fraud.

Goldman Sachs Execution & Clearing Ordered to Pay $800K FINRA Fine for Not Preventing Trade-Throughs in its Dark Pool

Published on: July 1, 2014 | by Shepherd Smith Edwards & Kantas, LLP

FINRA is fining Goldman Sachs Execution & Clearing, L.P. (GS) $800,000. The self-regulatory organization says that for almost three years the firm did not have written procedures and policies that were reasonably designed enough to keep trade-throughs of protected quotations in National Market System stocks from taking place through its SIGMA-X dark pool. As a result, over an 11-day period in 2011, almost 400,000 trades were carried out at SIGMA-X through a quotation that was protected with a price that was lower than the NBBO.

Trading centers are supposed to either direct orders to trading centers with the best price quotes or trade at the prices that are the best quotes. The SRO says that the firm did not know this was happening in part because latencies in market information at Goldman’s dark pool were not detected soon enough.

Goldman Sachs has already given back $1.67M to customers who were disadvantaged. By settling, the firm is not denying or admitting to the FINRA charges. However, it agreed to the entry of the SRO’s findings.

BNP Pleads Guilty to Criminal Charges Over Sanctions Violations, Pays $8.8B Fine

Published on: June 30, 2014 | by Shepherd Smith Edwards & Kantas, LLP

BNP Paribas SA (BNP) has pleaded guilty to criminal U.S. charges that it violated sanctions. As part of the plea deal, the bank will pay an $8.8 billion fine.

According to the allegations, BNP processed funds involving Cuba, Iran and Sudan. The bank pleaded guilty to conspiracy, falsifying bank records, and conspiring to violate the International Emergency Economic Powers Act. It will not be allowed to clear U.S. dollars for up to a year. This suspension is significant, since dollar clearing is key to doing business with international clients.

With the BNP case, authorities are making it clear that no bank is immune from criminal charges. The probe revolved around its commodity-trade finance enterprises in Geneva, Switzerland and Paris, France. Unauthorized dollar payments were made for oil companies to entities in Iran and Sudan.

U.S. Supreme Court Issues Ruling in Halliburton Case Involving Fraud-On-The-Market Theory, Class Action Securities Cases

Published on: June 28, 2014 | by Shepherd Smith Edwards & Kantas, LLP

Ruling in Halliburton v. Erica P. John Fund, the U.S. Supreme Court has left the fraud-on-the-market theory intact. However, they may have made it easier for large companies to get the courts to throw out class action securities cases sooner.

Halliburton Co. wanted to block a class action lawsuit accusing the company of inflating its stock price. A number of investors are claiming that they lost money after the stock price fell following news that it misrepresented revenues, overstated a merger’s benefits, and understated its liability in asbestos litigation.

Under the theory, securities fraud lawyers can use stock prices as proof that a company took part in fraud without having to prove that investors depended on company statements (or omissions of statements) when making decisions. Many corporate lawyers had hoped that the court would get rid of the 1988 precedent it made when it ruled in Basic V. Levinson more than 25 years ago. However, Chief Justice John Roberts wrote in the opinion for the justices that Halliburton didn’t offer any “special justification” for overruling the fraud-on-the-market presumption. (Justice Clarence Thomas, who ruled unanimously with the court, issued a separate opinion and was joined by Justices Samuel Alito and Antonin Scala. He said that Basic should have been overruled.)

Ponzi Scams: FINRA Bars Ex-Raymond James Broker Over $3M Ponzi Scam, Expels Success Trade Securities, Inc. for Bilking NFL and NBA Players

Published on: June 27, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority is ordering Success Trade Securities Inc. and its President and CEO Fuad Ahmed to pay 59 investors, mostly current and ex-NBA and NFL players, about $13.7 million in restitution for losses they sustained in a Ponzi scam. Success Trade is now expelled from FINRA membership and Ahmed is also barred.

According to a FINRA hearing panel, between 2/09 through 3/13, the firm and Ahmed sold $19.4 million in bogus promissory notes to investors while omitting or misrepresenting material facts. These facts would have revealed that parent company Success Trade Inc. was in financial trouble.

Ahmed and the firm are also accused of misrepresenting that the funds would go toward costs for marketing and growing the businesses of the parent company. The SRO says that the funds instead went toward went toward unsecured loans to Ahmed for his personal spending and to pay interest payments to note holders.

NY Sues Barclays Over Alleged High Speed Trading Favors in Dark Pool

Published on: June 26, 2014 | by Shepherd Smith Edwards & Kantas, LLP

New York Attorney General Eric Schneiderman has filed a securities fraud lawsuit against Barclays (BARC) Plc. accusing the British bank of lying about giving preference to high-frequency traders. The state contends that Barclays took part in fraudulent activity related to a dark pool. The British-based bank has 20 days to respond to the securities fraud charges.

Financial Industry Regulatory Authority data says that for the first week of June 2014, LX was the number two biggest alternative trading system in the United States. According to the high frequency trading case, LX, which is Barclays’ dark pool, favors computer-driven firms that can weave their way through the market at super fast speeds yet downplays how much these high-frequency traders use the venue.

Schneiderman says that the bank falsely depicted the way it routes the orders of clients and claimed to protect them from high-speed firms, when really the dark pool was run to the advantage of these traders. He claims that Barclays even specifically sought to bring in high-speed traders to LX, giving them preferential treatment over others by providing them with details about the way the dark pool is run.

SEC Stops Fraudulent Bond Offering by Chicago Suburb

Published on: June 25, 2014 | by Shepherd Smith Edwards & Kantas, LLP

The SEC has gotten an emergency court order against the city of Harvey. The order puts an end to a bond offering that the Chicago, Illinois suburb was promoting. Also named in the order is Joseph T. Letke, the city’s controller.

The regulator contends that Harvey and Letke allegedly took part in a securities scam to use proceeds from the bonds for undisclosed, improper uses. The bond offerings were supposed to pay for a new Holiday Inn. Instead, officials purportedly took at least $1.7M of the proceeds to cover operational costs for the city. With the temporary order, Harvey is not allowed to sell or offer any bonds through the middle of July.

Per the SEC complaint, Harvey’s bond offerings from ’08-’11 were limited obligations bonds. The bond offerings had to be used for their intended purpose. Also the money that was raised needed to go toward the construction of the hotel. This is because funds that were supposed to pay back the bonds came from tax revenues that would be impacted by the progress and funding of the project. News reports reveal that the proposed Holiday Inn hotel and conference center have yet to be finished, with the hotel’s facade appearing gutted in certain places.

FINRA Arbitration Panel Orders Stifel Nicolaus to Pay $2.7M to Ex-Head Trader

Published on: June 24, 2014 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Arbitration Panel says that Stifel Financial Corp. (SF), the brokerage unit of Stifel Nicolaus, must pay $2.7 million to, Sean Horrigan. Stifel’s ex-head trader claims that the brokerage firm defamed him and withheld his bonus without just cause. Now, the panel is holding the broker-dealer liable.

Horrigan was fired from Stifel in 2012. According to his lawyer, his termination happened several weeks after he overheard a phone call in which a manager insulted his wife to a salesperson. Horrigan’s wife was also employed at Stifel at the time. After the incident, he reacted emotionally. It was after trading hours. The firm then demoted him before letting him go just weeks prior to giving him his bonus for 2011.

Stifel contended that Horrigan was not entitled to get that money because on the day that the bonuses were issued he no longer worked for the firm. His attorney, however, says that unless an industry professional signs a contract mandating that an employee has to be employed on bonus payout day, he/she is still entitled to that money.