Investor Lawyers Blog

Bank of New York Mellon Corp. Must Contend with Pension Fund Claims Over Countrywide Mortgage-Backed Securities

Published on: April 10, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The U.S. District Court for the Southern District of New York has decided that investors can sue Bank of New York Mellon (BK) over its role as trustee in Countrywide Financial Corp.’s mortgage-backed securities that they say cost billions of dollars in damages. While Judge William Pauley threw out some of the clams filed in the securities fraud lawsuit submitted by the pension funds, he said that the remaining ones could proceed. The complaint was filed by the Benefit Fund of the City of Chicago, the Retirement Board of the Policemen’s Annuity, and the City of Grand Rapids General Retirement System. The retirement board and Chicago’s benefit fund hold certificates that 25 New York trusts and one Delaware trust had issued, and BNY Mellon is the indentured trustee for both. Pooling and servicing agreements govern how money is allocated to certificate holders.

In Retirement Board of Policemen’s Annuity and Benefit Fund of City of Chicago v. Bank of New York Mellon, the plaintiffs are accusing BNYM of ignoring its responsibility as the investors’ trustee. They believe that the bank neglected to review the loan files for mortgages that were backing the securities to make sure that there were no defective or missing documents. The bank also allegedly did not act for investors to ensure that loans having “irregularities” were taken from the mortgage pools. As a result, bondholders sustained massive losses and were forced to experience a great deal of uncertainty about investors’ ownership interest in the mortgage loans. The plaintiffs are saying that it was BNYM’s job to perfect the assignment of mortgages to the trusts, certify that documentation was correct, review loan files, and make sure that the trust’s master servicer executed its duties and remedied or bought back defective loans. Countrywide Home Loans Inc. had originally been master servicer until it merged with Bank of America (BAC).

The district court, in granting its motion, limited the lawsuit to the trusts in which the pension fund had interests. It also held that the fund only claimed “injury in fact” in regards to the trusts in which it held certificates. The court found that the certificates from New York are debt securities and not equity and are covered under the Trust Indenture Act. The plaintiffs not only did an adequate job of pleading that Bank of America and Countrywide were in breach of the PSAs, but also they adequately pleaded that defaults of the PSAs were enough to trigger BNYM’s responsibilities under Sections 315(b) and (c). The court, however, threw out the claims that BNYM violated Section 315(a) by not performing certain duties under the PSAs and certain other agreements.

BNYM says it will defend itself against the claims that remain.

Bank of NY Mellon must face lawsuit on Countrywide, Reuters, April 3, 2012

Judge Rejects Bank Of NY Mellon Motion To Dismiss Countrywide Suit, Fox, April 3, 2012

More Blog Posts:
District Court in Texas Decides that Credit Suisse Securities Doesn’t Have to pay Additional $186,000 Arbitration Award to Luby’s Restaurant Over ARS, Stockbroker Fraud Blog, June 2, 2011

Credit Suisse Group AG Must Pay ST Microelectronics NV $431 Million Auction-Rate Securities Arbitration Award, Stockbroker Fraud Blog, April 5, 2012

Citigroup to Pay $285M to Settle SEC Lawsuit Alleging Securities Fraud in $1B Derivatives Deal, Institutional Investor Securities Blog, October 20, 2011

Principals of Global Arena Capital Corp. and Berthel, Fisher & Company Financial Services, Inc. Settle FINRA Securities Allegations

Published on: April 6, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Harry Friedman, a principal of Global Arena Capital Corp. has agreed to a bar that prevents him from associating with any Financial Industry Regulatory Authority member. Although he has not admitted to or denied the allegations against him, Friedman has consented to the sanction and the entry of findings accusing him of not properly supervising a number of employees who used improper markups in a fraudulent trading scheme that, as a result, denied clients of best execution and the most favorable market price.

It was Friedman’s job to make sure that the head trader provided accurate disclosure on order tickets, such as when they were received and executed, the role that the broker-dealer played, and how much compensation the financial firm would get from each securities transaction. According to FINRA, Friedman either knew or should have known that order tickets were not being marked properly.

FINRA also found that Friedman, whose job it was to supervise and review trading activity involving his firm, failed to reconcile daily positions and trades in principal accounts. Also, per the SRO, Global Arena Capital Corp., through Friedman, did not set up, maintain, and enforce supervisory control policies and procedures that were supposed to ensure that registered representatives and others were in compliance with securities regulations and laws. Also, for three years, Friedman allegedly falsely certified that the financial firm had the necessary processes in place and that they had been evidenced in a report that the CCO, CEO, and other officers had reviewed.

In other FINRA-related news, Berthel, Fisher & Company Financial Services, Inc. registered principal Marsha Ann Hill has been suspended from associating with any Financial Industry Regulatory Authority member for a year. She also will pay a $20,000 fine.

Hill is accused of allegedly making unsuitable recommendations to a customer regarding the purchase of a variable annuity for $110,418.97 and two private placement offerings for $10,000 each. Per the findings, the transactions were not suitable because over 90% of the client’s liquid net worth had been placed in the variable annuity, which was illiquid and had a seven-year surrender period. (The SRO says that the private placement offerings were not only high risk, but also they failed to meet the client’s investment objectives.) Hill is accused of misusing the customer’s funds when she delayed the investments, resulting in her firm violating SEC Rule 15c3-3.

She also allegedly sold a private placement to an unaccredited investor. When her supervisor noted that this was an accredited-only investment, Hill erased certain information on the Account Information Form and put different yearly income, liquid net worth, and net worth amounts without letting her client know. Hill is settling the securities fraud allegations against her without deny or admitting to them.

Broker-Dealers are Making Reverse Convertible Sales That are Harming Investors, Says SEC, Stockbroker Fraud Blog, July 28, 2011
Despite Reports of Customer Satisfaction, Consumer Reports Uncovers Questionable Sales Practices at Certain Financial Firms, Stockbroker Fraud Blog, January 7, 2012
SIFMA Wants FINRA to Take Tougher Actions Against Brokers that Don’t Repay Promissory Notes, Institutional Investor Securities Blog, January 17, 2012 Continue Reading ›

Wirehouses Struggle to Retain Their Share of the High-Net-Worth-Market

Published on: April 6, 2012 | by Shepherd Smith Edwards & Kantas, LLP

With their share of the high-net-worth-market expected to drop down to 42% in 2014 from the 56% peak it reached five years ago, wirehouses are looking to regain their grip. According to Cerulli Associates, Bank of America Merrill Lynch (BAC), Wells Fargo (WFC), Morgan Stanley Smith Barney (MS), and UBS (UBS)—essentially, the largest financial firms—will see their portion of the high-net-worth market continue to get smaller. Meantime, because private client groups can now be called the largest high-net-worth services provider, they can expect their hold to continue as they likely accumulate about $2.8 trillion in high-net-worth assets in two years—a 49% market share.

The Cerulli report says that the wirehouses’ reduced share of the market can be attributed to a number of factors, including the fact that high-net-worth investors are allocating their wealth to several advisors at a time. Also, during the economic crisis of 2008, many investors transferred some assets out of the wirehouses. There were also the wirehouse advisers that chose to go independent or enter another channel. In many cases, these advisors’ clients ended up going with them.

The private client groups are the ones that have benefited from this shift away from wirehouses. A main reason for this is that they are considered safer for both advisors that wanted a change and investors who were seeking lower risks.

Also, per the report, there has been healthy growth in the independent advisor industry. The registered investment advisor/multi-family offices grew their assets under management by 18% two years ago. Meantime, during this same time period, wirehouses assets only grew by 2%.

In other wirehouse-related news, beginning summer, ERISA Section 408(b)(2) ‘s new point-of-sale fee disclosure rules will make it harder for these firms to up the fees they charge investors. According to AdvisorOne, as a result, these firms are raising the fees that they charge mutual fund companies instead.

Wirehouses and mutual fund companies usually have a revenue sharing agreement. In exchange for investing their clients’ money in a mutual fund, a wirehouse charges the mutual fund company a fee (this is usually a percentage of every dollar that the client invests). However, in the wake of the upcoming disclosure changes, financial firms have started raising that fee.

For example, according to The Wall Street Journal, at the start of the year, UBS approximately doubled the rate that mutual funds must now pay. The financial firm is seeking up to $15 for every new $10,000 that a clients invests in a mutual fund. Moving forward, this will go up to $20 annually. Morgan Stanley’s new raised rate is $16 a year. It used to charge $13 for stock funds and $10 for bond funds.

Wirehouses are saying that since its the brokerage firms and not the individual financial adviser who gets the separate payment streams, the rate won’t impact the judgment of an adviser when it comes to selecting funds. Such fees paid by mutual funds can impact a financial firm’s bottom line. For example, last year, almost a third of Edward Jones’s $481.8 million in profits came from mutual fund company fees.

Wirehouses Battle to Keep Market Share, On Wall Street, March 28, 2012

FINRA Bars Registered Representatives Accused of Securities Misconduct and Negligence, Stockbroker Fraud Blog, April 5, 2012

FINRA Bars Registered Representatives Accused of Securities Misconduct and Negligence

Published on: April 5, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Registered representative Erick Enrique Isaac has turned in a Letter of Acceptance, Waiver and Consent that affirms his agreement to be barred from associating with any Financial Industry Regulatory Authority member. Although he isn’t denying or admitting to the findings, Isaac has consented to the described sanction and the entry of findings that claims he became affiliated with a member firm at the behest of a relative, a former registered representative who needed access to a broker-dealer to make trades for his clients.

While registered with the financial firm, Enrique allegedly gave trading directions from this relative to another firm representative, who then made the trades. He also allegedly started sending over hundreds of thousands of dollars in commissions on those securities transactions to the relative.

FINRA’s findings contend that Isaac knew that his relative was controlling the trading in at least some of the client accounts that resulted in commission fees. He also kept sending the commission funds to the relative even after finding out that the latter was barred by the SRO from associating with a member firm.

Also submitting a Letter of Acceptance, Waiver and Consent in another FINRA case is First Merger Capital, Inc. registered principal Mark SImonetti who is not allowed to associate with any FINRA member for three months.

FINRA accused Simonetti of knowing that registered representatives at First Merger Capital were paying the operators and co-owners of a branch of the financial firm (a foreign-based publicly traded company) $350,000 for unspecified services. Even though this should have indicated to Simonetti that the financial firm’s COO was not appropriately discharging his compliance and supervisory duties, he still allegedly failed to properly supervise the brokers to make sure that everyone disclosed all material information about this consulting agreement when soliciting clients to buy stock in the company.

Also, per FINRA, when the counsel for another foreign-owned publicly traded company referred clients, who were current and former company employees, to First Merger Capital, no one at the financial firm spoke to these new clients to make sure that the information they provided when opening the accounts was accurate.

The customers deposited more than 3.8 million shares of company stock. The company’s CEO, who was given control of the sales of the stock, then gave the order for company shares to be sold. More than $23 million of company stocks were sold. These were the only transactions in the clients’ accounts. Also, a number of branch owners and operators who took part in securities transactions netted commission as a result. FINRA says that SImonetti should have monitored, analyzed, and investigated these transactions to figure out whether they warranted a Suspicious Activity Report. As part of the settlement, Simonetti has agreed to participate in the FINRA Department of Enforcement’s investigation into this matter and to testifying truthfully.

FINRA Fines AXA Advisors $100,000 For Allegedly Not Firing Broker who Ran Ponzi Scam Sooner, Stockbroker Fraud Blog, March 16, 2012

FINRA May Surrender Proprietary BrokerCheck Lock, Stockbroker Fraud Blog, March 8, 2012

Citigroup Ordered by FINRA to Pay $1.2M Over Bond Markups and Markdowns, Institutional Investor Securities Blog, March 27, 2012 Continue Reading ›

Merrill Lynch to Pay Brokers Over $10M for Alleged Fraud Over Deferred Compensation Plans

Published on: April 5, 2012 | by Shepherd Smith Edwards & Kantas, LLP

A Financial Industry Arbitration panel has ordered Merrill Lynch (BAC) to pay over $10 million to two brokers who claim the financial firm wrongly denied their deferred compensation plans to vest. Per the FINRA arbitration panel, senior management at Merrill purposely engaged in a scam that was “systematic and systemic” to prevent its former brokers, Tamara Smolchek and Meri Ramazio, from getting numerous benefits, including the ones that they were entitled to under the financial firm’s deferred-compensation programs, so that it wouldn’t be liable after the acquisition. The panel accused Merrill of taking part in “delay tactics” and “discovery abuses.”

Some 3,000 brokers left Merrill after Bank of America Corp. (BAC) acquired it in 2008. A lot of these former employees are now claiming that they were improperly denied compensation.

Smolchek and Ramazio alleged a number claims related to their deferred compensation plans’ disposition. Causes of action against Merrill included breach of duty of good faith and fair dealing, breach of contract, breach of fiduciary duty, unjust enrichment, constructive trust, conversion, defamation, unfair competition, tortious interference with advantageous business relations, violating FINRA Rule 2010, fraud, and negligence.

Broker employment contracts usually mandate that an employee stay with a financial firm for several years before they are entitled to vest the money they are earning in their tax-deferred accounts. However, several of Merrill’s deferred compensation programs allow brokers that have left the firm for “good reason” to have their money vest.

The FINRA panel expressed shock that after the departure of 3,000 Merrill advisers following the Bank of America acquisition, the firm did not approve a single claim for vesting that cited a “good reason” under the deferred compensation programs. Per Merrill’s own analysis, had it approved the vesting requests, the financial firm might have paid anywhere from the hundreds of millions to billions of dollars in possible liability.

Per the compensation ruling, Merrill has to pay Ramazio $875,000 and Smolchek $4.3 million in compensatory damages for unpaid deferred compensation, unpaid wages, lost wages, lost book, lost reputation, and value of business. The FINRA panel also awarded $1.5 million in punitive damages to Ramazo and $3.5 million to Smolchek.

The same day that the decision was issued, Merrill filed an appeal. The financial firm wants the ruling overturned, claiming that it never received a fair hearing and that panel chairwoman Bonnie Pearce was biased. Merrill contends that Pearce did not disclose that her husband is a plaintiff’s lawyer who sued the financial firm for customers and brokers in at least five lawsuits. Merrill is accusing Pearce of “overt hostility.”

Merrill Lynch Loses $10 Million Compensation Ruling, The Wall Street Journal, April 4, 2012

Merrill Lynch Savaged by FINRA Arbitrators in Historic Employee Dispute, Forbes, April 4, 2012

More Blog Posts:
Securities Claims Accusing Merrill Lynch of Concealing Its Auction-Rate Securities Practices Are Dismissed by Appeals Court, Stockbroker Fraud Blog, November 30, 2011

Merrill Lynch Faces $1M FINRA Fine Over Texas Ponzi Scam by Former Registered Representative, Stockbroker Fraud Blog, October 10, 2011

Merrill Lynch, Pierce, Fenner & Smith Ordered to Pay $1M FINRA Fine for Not Arbitrating Employee Disputes Over Retention Bonuses, Institutional Investor Securities Blog, January 26, 2012

CFTC Says RBC Took Part in Massive Trading Scam to Avail of Tax Benefits

Published on: April 4, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The Commodities Futures Trading Commission has filed a lawsuit accusing Royal Bank of Canada of taking part in hundreds of millions of dollars worth of illegal futures trades to earn tax benefits linked to equities. In its complaint, the CFTC claims the Toronto-based lender made misleading and false statements about “wash trades” between 2007 and 2010, which allowed affiliates to trade between themselves in a manner that undermined competition and price discovery on the OneChicago LLC exchange. This electronic-futures trading exchange is partly owned by CME Group Inc.

The alleged scam is said to have involved RBC officials working with two subsidiaries on the selling and buying of futures contracts that give the right to sell the stock later on at certain prices. CFTC said that this removes the risk of RBC sustaining any losses on the investments, while locking in the tax breaks.

Also, according to the CFTC, RBC designed certain instruments related to the transactions that were traded on OneChicago. The transactions, which involved narrow-based indexes and single-stock futures, were used to hedge the risks involved in holding the equities. CFTC says that the Canadian bank tried to cover up the scam and even provided misleading and false statements when CME started asking questions.

RBC contends that CFTC’s allegations against it are “absurd” and the lawsuit “meritless.” The bank also claims that the trades in question were completely documented and reviewed, as well as monitored by the exchanges and CFTC.

CFTC Enforcement director David Meister said that the securities action shows that the regulator will not balk at bringing charges against those that illegally exploits the futures market for profit. The CFTC has been under pressure to get tougher on its oversight of the futures industry in the wake of MF Global Holdings Ltd.’s failure last year. The demise of that securities firm resulted in an approximately $1.6 billion shortfall in client funds. Measured by the futures contracts’ national dollar amount, this case against RBC is the biggest wash-sale lawsuit the CFTC has ever brought.

Meantime, RBC says that the CFTC’s allegations against it are “absurd” and the lawsuit “meritless.” The bank has issued a statement claiming that the trades in question were completely documented and reviewed, as well as monitored by the exchanges and CFTC.

The US regulator is seeking injunctions against additional violations and monetary penalties of three times the monetary gain for each violation or $130,000/per violation from 10/04 to 10/08 and $140,000/violation after that period.

CFTC Deals Out Royal Pain, Wall Street Journal, April 3, 2012

RBC Sued by US Regulators Over Wash Trades, Bloomberg Businessweek, April 3, 2012

More Blog Posts:
SEC Inquiring About Wisconsin School Districts Failed $200 Million CDO Investments Made Through Stifel Nicolaus and Royal Bank of Canada Subsidiaries, Stockbroker Fraud Blog, June 11, 2010

Texas Man Sued by CFTC Over Alleged Foreign Currency Fraud, Stockbroker Fraud Blog, February 23, 2012

CFTC and SEC May Need to Work Out Key Differences Related to Over-the-Counter Derivatives Rulemaking, Institutional Investor Securities Blog, January 31, 2012 Continue Reading ›

Netherlands Offers Jurisdiction To Class Actions Securities Cases for US Citizens and Others Who Cannot Obtain Redress Domestically

Published on: April 3, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Ever since the US Supreme Court ruled in Morrison et al v National Australia Bank Ltd et al that claimants not residing in the United States or American citizens who purchased shares on a foreign exchange can’t settle or litigate their case in the US, these parties have been seeking other jurisdictions to get their claims resolved. Recently, the Netherlands has stepped in to provide this needed alternative.

It was earlier this year that the Amsterdam Court of Appeal accepted jurisdiction to preside over a class action securities settlement involving Zurich Financial Services (ZFS) subsidiary Converium Holding shares. The involvement of Dutch shareholders’ association VEB and Stichting Converium Securities Compensation Foundation was enough for court jurisdiction to be granted even though not a lot of the class members reside in the Netherlands. (The appeals court used the Dutch Act on the Collective Settlement of Mass Claims to grant jurisdiction). As a result, about 10,000 institutional and individual investors who sustained financial losses when they invested in Converium stock outside the US were able to share $58.4 million, minus legal fees.

There was a class action settlement that was declared in the US that awarded $84.6 million to a smaller group of class members. However, only US persons and those that bought their Converium securities on any exchange were allowed to participate in the class, which was certified by the United States District Court for the Southern District of New York.

SEC to Investigate Seesawing Credit Suisse TVIX Note

Published on: March 30, 2012 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is reviewing the VelocityShares 2x Daily VIX Short Term Exchange Traded Note (TVIX) that collapsed last week, right after it climbing nearly 90% beyond its asset value. The drop came not long after Credit Suisse stopped issuing shares last month. Now, the Switzerland-based investment bank says it will start creating more shares.

Also known as TVIX, the VelocityShares 2x Daily VIX Short Term Exchange Traded Note is an exchanged-traded note that seeks to provide two times the daily return of the VIX volatility index. With the note’s value hitting nearly $700 million up from where it was at approximately $163 million in 2011 and now crashing down, The TVIX has taken investors for quite the ride.

Investor advocates are saying that more should be done to protect retail investors. There is growing concern that with the rising popularity of ETNs, investors and financial advisers are getting into these products without fully understanding them or the risks involved. Financial Industry Regulatory Authority has said that it too will look into the “events and trading activity” that led to the collapse of the TVIX note.

Five Morgan Stanley Smith Barney Managed Future Funds Report $79.1M in Losses in 2011

Published on: March 30, 2012 | by Shepherd Smith Edwards & Kantas, LLP

Morgan Stanley (MS) Smith Barney is reporting that five of its managed future funds sustained 9.5% in average losses—that’s $79.1 million—in the wake of client withdrawals last year. Only one of the funds was profitable. The largest fund by assets, Morgan Stanley Smith Barney Spectrum Select LP, faced $55.2 million in redemptions and lost $67.9 million.

Subsidiary Ceres Managed Futures LLC, the funds’ manager, had placed assets with outside trading advisers. In the wake of these losses, Ceres let go two underlying managers: John W. Henry & Co. and Sunrise Capital Partners. Spectrum Currency, which is the fund that they both managed, sustained losses of 9.8% in 2011. That fund is now called Spectrum Currency and Commodity.

Managed-future funds use futures or forwards contracts when betting on the declines or advance in securities, including bonds, commodities, stocks, and currencies. Some funds also invest in securities connected to certain events, such as changes in interest rates or the weather.

It’s been a tough time recently for Morgan Stanley. Last year, the financial firm had to give back approximately $700 million to investors in its flagship global real-estate fund. It also was forced to cut fees (both the fee charged on investments and management fees) to get them to stay. The fund’s size was also cut by $4 billion, resulting in investors getting some of their money back.

Over two-thirds of investors have consented to give Msref VII until June 2013 to invest rather than having billions of dollars returned to them sooner. Morgan Stanley’s earlier fund, which closed in 2007, suffered losses of 62% through March despite a 23% net return during that period’s last 12 months.

Also last December, media sources reported that Zynga stock purchased by Morgan Stanley’s mutual funds for $75 million in the late-stage round dropped in price from $14/share to $9/share, even as the financial firm cashed in two times: on private placement fees (if there were fees) and on fees for the IPO underwriting.

There was also the huge loss sustained by Morgan Stanley in the settlement it reached with bond insurance company MBIA. The two entities had sued one another over insurance sold on mortgage-backed securities. For a $1.1 billion payment by MBIA, Morgan Stanley agreed to give up insurance claims over guarantees on mortgage bonds. However, as a result, the financial firm took a pretax $1.8 billion charge in the fourth quarter of 2011. Morgan Stanley had purchased the insurance against bond defaults.

Meantime, MBIA dismissed its complaint against Morgan Stanley over the quality of the mortgage bonds. The insurer had accused the financial firm of misrepresenting these, which was what the insurance company was supposed to guarantee. (As MBIA’s credit-default swap bets started to falter at the start of the financial crisis, regulators were forced to divide the insurance company into a structured finance unit and a municipal guarantee business.)

Morgan Stanley Settles MBIA Suits, Will Take $1.8B Hit, Forbes, December 13, 2011

Morgan Stanley Brokerage Managed-Futures Funds Lose 9.5%, Bloomberg/Businessweek, March 28, 2012

MBIA and Morgan Stanley Settle Bond Fight, The Wall Street Journal, December 14, 2011

More Blog Posts:
Morgan Stanley Faces $1M FINRA Fine for Excessive Markups and Markdowns on Corporate and Municipal Bond Transactions, Institutional Investor Securities Fraud, September 17, 2011

Morgan Stanley Smith Barney Employee Fined and Suspended by FINRA Over Unauthorized Signatures, Stockbroker Fraud Blog, September 19, 2011

Ameriprise Financial Sued by Employees Over Allegedly Excessive 401(K) Costs

Published on: March 29, 2012 | by Shepherd Smith Edwards & Kantas, LLP

In a civil case that is still underway, a number of Ameriprise Financial Inc. workers are suing their employer for what they claim was $20 million in excessive costs that resulted because the company put their 401(k) contribution in proprietary funds. The complaint, filed in September in the U.S. District Court in Minnesota last September, has been seeking class action status.

The 401k plan under dispute was launched in 2005 and the class action securities lawsuit is looking to represent everyone that the plan has employed since then. Over 10,000 members may qualify to become part of the class. The group is led by several former and current Ameriprise plan participants.

Also named as defendants in this civil suit are Ameriprise’s 401(k) investment committees and employee benefits administration. According to the plaintiffs, the defendants violated their fiduciary obligation to the retirement plan, which included investments involving mutual funds and target date funds from RiverSource Investment LLC (an Ameriprise subsidiary that is now called Columbia Management Investment Advisers LLC). The plaintiffs say that about $500 million in plan assets went into Ameriprise Trust Co. and RiverSource yearly.

The plaintiffs claim that the investment that their money went into resulted in fees generated for Ameriprise Trust, RiverSource, and its affiliates. The Ameriprise workers say that the plan suffered over $10 million in losses due to excessive fees and expenses. They also believe that RiverSource was behind in their benchmarks, suffered outflows in the billions of dollars in 2006 and 2005, and was given poor ratings by Morningstar Inc.

The plaintiffs believe that defendants selected the more costly funds with the poorer performance stories to create revenue for ATC and RiverSource and that this also benefited Ameriprise. They say that Ameriprise violated its fiduciary duty, under the Employee Retirement Income Security Act of 1974, to the retirement fund.

The plaintiffs are seeking disgorgement of all revenues, restitution, and all the money that was lost. They want the court to make sure the plan’s losses are paid back and participants are placed in the position they would have been in if only the plan had been administered correctly.

401K Plan Lawsuits
There are fiduciaries and owners of businesses that could find themselves in legal hot waters in the wake of the Department of Labor regulations that now require that the hidden, excessive fees in 401(k) plans be disclosed. Unbeknownst to participants, these fees have been reducing retirement plan balances. Also, the government is now pushing for full disclosure of all fees and wants retirement plan offerings to be provided to employees at the lowest costs possible.

There have ben other employees of other companies that have also filed their 401(k) fees class action lawsuits. For example, just last December, Walmart settled a $13.5 million class action complaint with its employees. The lawsuit blamed the company and Bank of America‘s Merrill Lynch unit for passing along expenses and high fees that were unreasonable to some two million workers.

Ameriprise workers sue over company’s own 401(k) funds, Investment News, September 29, 2011

Ameriprise workers seek class-action suit on 401(k), Star Tribune, September 29, 2011

More Blog Posts:
Ameriprise to Sell Securities America Even as it Finalizes Securities Settlement with Investors of Medical Capital Holdings and Provident Royalties Private Placements, Stockbroker Fraud Blog, April 26, 2011

Ameriprise Broker Arrested for Defrauding Investors – Clients Say He Cashed Checks Made Out to Ameriprise, Stockbroker Fraud Blog, July 7, 2007
Bank of America to Pay $335M to Countrywide Financial Corp. Borrowers Over Allegedly Discriminating Lending Practices, Stockbroker Fraud Blog, December 21, 2011 Continue Reading ›