Investor Lawyers Blog

Citigroup Request to Overturn $54.1M Municipal Bond Arbitration Ruling Denied by Judge

Published on: December 27, 2011 | by Shepherd Smith Edwards & Kantas, LLP

A US judge has denied Citigroup’s request that the $54.1M Financial Industry Regulatory Authority arbitration award issued to investors that sustained losses in municipal bond funds be overturned. This is one of the largest securities arbitration awards that a broker-dealer has been ordered to pay individual investors. Brush Creek Capital, retired lawyer Gerald D. Hosier, and investor Jerry Murdock Jr. are the award’s recipients. However, these Claimants are not the only investors to come forward contending that they were told the funds were suitable for investors that wanted to preserve their capital.

The investor losses were related to several leveraged municipal bond arbitrage funds that saw their value significantly drop between 2007 and 2008. Citigroup Global Markets had sold the municipal bond funds through MAT Finance LLC. Proceeds were invested in longer-term muni bunds while borrowing took place at low, short-term rates. The strategy proved to be unsuccessful, resulting in investors losing up to 80% of their money.

According to The Wall Street Journal, when it issued its ruling the arbitration panel appeared to reject three defenses that financial firms usually make:

• The financial crisis, and not the financial firm, is to blame for the losses.
• Sophisticated, rich investors should have known what risks were involved.
• The prospectus had warned in advance that investors could lose everything.

The Claimants alleged fraud, failure to supervise, and unsuitability. They had sought no less than $48 million in compensatory damages, fees, lost-opportunity costs, commission, lawyers’ fees, and interest.

The FINRA arbitration panel awarded $21.6 million in compensatory damages, plus 8% per annum, to Hosier, $3.9 million in compensatory damages, plus 8% per annum, to Murdock, Jr, and $8.4 million in compensatory damages, plus 8% per annum, to Brush Creek Capital LLC.

All Claimants were also awarded $3 million in lawyers’ fees, $17 million in punitive damages, $33,500 in expert witness fees, $13,168 in court reporter expenses, and $600 for the Claimant’s filing fee.

Following the FINRA ruling, Citigroup contended that the arbitration panel had ignored the law when arriving at the award. The brokerage firm also claimed that investors could not have depended on verbal statements that the financial firm had expressed about purchases because the clients had acknowledged through signed agreements that they could lose everything they invested. By denying Citigroup’s request to throw out the arbitration award, Judge Christine Arguello, however, said that the court found Citigroup’s “argument wholly unpersuasive.”

A Crack in Wall Street’s Defenses, New York Times, April 24, 2011

Citigroup Slammed With $54 Million Award by FINRA Arbitrators in MAT / ASTA Case, Municipal Bond, April 12, 2011

Citigroup loses suit to overturn $54-million ruling, Reuters, December 22, 2011

More Blog Posts:
JPMorgan Chase to Pay $211M to Settle Charges It Rigged Municipal Bond Transaction Bidding Competitions, Stockbroker Fraud Blog, July 9, 2011

Citigroup Ordered by FINRA to Pay $54.1M to Two Investors Over Municipal Bond Fund Losses, Stockbroker Fraud Blog, April 13, 2011

Citigroup’s $285M Mortgage-Related CDO Settlement with Raises Concerns About SEC’s Enforcement Practices for Judge Rakoff, Institutional Investor Securities Blog, November 9, 2011

Former-Chicago Bears Wide Receiver Willie Gault Sued by SEC for Securities Scam Involving the Alleged Inflation of Stock Prices

Published on: December 25, 2011 | by Shepherd Smith Edwards & Kantas, LLP

The US Securities and Exchange Commission is suing former NFL football player Will Gault for securities fraud. According to US regulators, he and several others participated in a fraud scam that involved inflating the stock price of Heart Tronics, which is a heart-monitoring device company. Other defendants in the Commission’s case include lawyer Mitchell Stein, Heart Tronics Co-CEO J. Rowland Perkins, and Stein’s driver Martin B. Carter. Investors were bilked of nearly $8 million.

Per the SEC’s complaint, between 2006 and 2008 Heart Tronics repeatedly announced that millions of dollars in (bogus) sales orders for its heart-monitoring devices had been placed. To garner investor confidence, Gault was appointed company president and Co-CEO.

Meantime, Stein, who hired promoters to promote the company’s stock online, allegedly made secret trades. The Commission says he used investors’ money to pay for private jets, a number of homes, and exotic motor vehicles.

Stein is also a defendant in a parallel criminal case filed by the US justice department. In the indictment against him, prosecutors charged him with putting out press releases promoting the fake sales, conspiring to obstruct the SEC probe, and taking part in a financial scam to artificially increase Heart Tronic’s stock price through bogus orders from nonexistent clients.

The Commission says that Perkins and Gault hardly ever asked Stein about his actions, as well as failed to fulfill their fiduciary duties. Gault and Stein are accused of defrauding one investor, in particular, who made a substantial investment in the heart-monitoring device company. That investor’s money ended up in Gault’s personal brokerage account.

The SEC is accusing Carter and Stein of generating false documents to support false disclosures that were made to the public. This included sending a letter from a fictitious client in order to deceive auditors, management, and disclosure counsel, as well as sending products to a friend of Carter’s to make it seem as if an actual device was delivered.

The SEC is seeking a permanent bar against Stein, Gault, and Perkins that would prevent them from serving as corporate officers. They also want them to pay financial penalties and give back ill-gotten gains.

Gault was a former University of Tennessee football player who played for the Chicago Bears for 11 seasons. He also belonged to the US Olympic team that boycotted the Summer Games in Moscow in 1980.

Securities Fraud
If you are an investor that was defrauded by people who took advantage of you and took the money for their own personal use and gain, you may have grounds for a securities fraud case.

Ex-NFL Star Willie Gault Sued by SEC in Stock-Pumping Fraud, BusinessWeek, December 23, 2011
SEC Charges California Company, Co-CEOs, and Attorney in Series of Fraudulent Schemes Pumping Company Stock, SEC, December 20, 2011
Read the SEC Complaint (PDF)

More Blog Posts:
Three Investment Advisers Charged with Massachusetts Securities Fraud, Stockbroker Fraud Blog, December 16, 2011
Colorado Securities Fraud: Universal Consulting Resources LLC and Owner Richard Dalton to Pay $15.8M to Settle SEC Lawsuit Over Ponzi Scam, Stockbroker Fraud Blog, December 9, 2011
Former Fannie Mae and Freddie Mac Executives Face SEC Securities Fraud Charges, Institutional Investor Securities Blog, December 16, 2011 Continue Reading ›

Barclays Capital Ordered by FINRA to Pay $3M Fine For Alleged Subprime Mortgage Securitization-Related Misrepresentations

Published on: December 23, 2011 | by Shepherd Smith Edwards & Kantas, LLP

FINRA says that Barclays Capital Inc. will pay $3 million over charges of inadequate supervision related to the residential subprime mortgage securitizations and the misrepresentation of delinquency data. The SRO claims that between 3/07 and 10/10, Barclays misrepresented three RMBS’s historical delinquency rates.

Per industry rules, financial firms have to give investors certain performance information for securities that they issue. FINRA says that Barclay’s Capital misrepresented the historical delinquency rates for the RMBS between March 2007 and December 2010. This inaccurate data was published on the company’s website, which impacted how investors were able to evaluate other securitizations.

Historical delinquency rates, which provide historical performance information for previous securitizations with mortgage loans, are key in helping an investor determine and RMBS’s value and whether mortgage holders’ inability to make loan payments could disrupt future returns. The inaccurate information that was posted on the Barclay’s Capital website was referred to as historical delinquency rates in five subsequent residential subprime mortgage securitizations and had errors that were key enough to impact investors.

According to FINRA Enforcement Chief Brad Bennett, Barclay lacked a system that could ensure that delinquency data that was published was accurate.

Barclays has settled the case. However, the financial firm is not denying or admitting to the charges.

It was just earlier this year that FINRA fined Merrill Lynch $3 Million and Credit Suisse Securities $4.5 Million over misrepresentations involving RMBS. Both financial firms settled the allegations without denying or admitting to the charges.

According to the SRO, in 2006, 21 RMBS’s historical delinquency rates were misrepresented by Credit Suisse. The financial firm allegedly knew that this information was not accurate yet failed to adequately look into the mistakes, tell clients about the errors, or correct the information, which was published on its we site. The delinquency errors for six of the 21 securitizations were enough to impact the way investors were able to evaluate subsequent securitizations. Credit Suisse also allegedly did not define or name the methodology that was applied in determining the mortgage delinquencies in five other subprime securitizations. (Disclosing which method was issued is required because there are different standards for determining delinquencies.)

Regarding the charges against Merrill Lynch, the SRO claims 61 of the financial firm’s subprime RMBS had historical delinquency rates that were misrepresented. However, upon discovering the mistakes, Merrill Lynch published the correct data online. In eight cases, the delinquencies impacted investors’ ability to assess subsequent securitizations.

FINRA Fines Barclays Capital $3 Million for Misrepresentations Related to Subprime Securitizations, FINRA, December 22, 2011

Finra Fines Credit Suisse, Bank of America Over RMBS Errors, Bloomberg, May 26, 2011

More Blog Posts:
Morgan Keegan Settles Subprime Mortgage-Backed Securities Charges for $200M, Stockbroker Fraud Blog, June 29, 2011

Investors Want JP Morgan Chase & Co. To Explain Over $95B of Mortgage-Backed Securities, Institutional Investor Securities Blog, December 17, 2011

Federal Home Loan Banks Say Countrywide Financial Corp Mortgage Bond Investors May Be Owed Way More than What $8.5B Securities Settlement with Bank of America Corp. is Offering, Institutional Investor Securities Blog, July 22, 2011

Wells Fargo-Sponsored Survey Finds that Sense of Security About Retiring Doesn’t Necessarily Come with Affluence

Published on: December 22, 2011 | by Shepherd Smith Edwards & Kantas, LLP

According to a recent Wells Fargo & Co-sponsored survey, 23% of the 800 Americans with at $100,000 in investable assets who participated reported that they don’t feel confident that they will have enough money saved by the time they retire. 75% said they felt sure that they would have enough. The ones most likely to feel confident are the ones with a written a financial plan, trust that the stock market will take care of their investments, are married, have at least $250,000 in investable assets, and/or are male. Those who felt unsure about their finances for when they retire included those who are single, female, belong to the 40-59 age group, and/or have under $250,000 in investable assets.

Some of the Other Findings from the Survey:
• 48% of those in the 25 to 49 age range want to keep working during their retirement years.
• More men (42%) than women (34%) wanted to keep working even after hitting retirement age.
• Approximately three-quarters of those that are currently working believe that having a specific amount of money matters more than what age they are when they retire.
• Women without a written financial plan and/or with investable assets of over $100,000 but under $250,000 are more likely to believe that they won’t have enough money when they retire regardless of what they do now.
• Nearly 2 in 5 Affluent Americans feel like they should significantly reduce their spending now to save up for retirement • One-third of those surveyed worry that they won’t be able to leave their children an inheritance because their savings will have to go toward their retirement • Four in 10 prefer to enjoy life now rather than worry: These people are usually already retired (54%), seniors belonging to 60-75 age group (51%), Democrats (47%), and parents with kids that are already legal adults (44%)
• Parents with kids under 18 (71%), adults belonging to the 40-49 age group (62%), women (65%), and seniors age 50-59 (64%) are the ones most likely to worry about what will happen when they retire.

Unfortunately, there appears to a nationwide rise in investment fraud targeting baby boomers, many who are just (or on the verge of) retiring. The Wall Street Journal reports that many of these older investors found themselves placing their money in high-risk bets to compensate for the losses they suffered during the recently financial crisis.

There are approximately 77 million baby boomers currently live in the US. Of the 3,475 enforcement actions involving fraud in 2010, 1,241 affected investors were 50 years of age or older. According to securities regulators, this number is expected to hit a record figure this year. Enforcement actions involved free-lunch seminars, variable annuities, or the misuse of professional credentials. Common types of senior investment fraud included Ponzi scams, self-directed IRA’s containing bogus investments in gold, real estate, and oil wells, and promissory notes.

Our elder financial fraud lawyers at Shepherd Smith Edwards and Kantas, LLP represent seniors throughout the US. We know the toll that losing your savings can take on you and your family.
Retirement Fears Jump the Wealth Gap to Strike Many Affluent Americans, Wells Fargo Retirement Study Finds, Wells Fargo, December 14, 2011
Boomers Wearing Bull’s-Eyes, Wall Street Journal, December 14, 2011

More Blog Posts:
Well Fargo Advisers to Pay $2 Million to Settle Claims that Broker Sold Unsuitable Reverse Convertible Securities to Seniors, Stockbroker Fraud Blog, December 17, 2011
Texas Securities Fraud Over Sale of Allegedly Bogus Annuities to Elderly Seniors, Stockbroker Fraud Blog, December 14, 2011
LPL Financial Ordered to Pay $100K for Lack of Adequate Oversight that Resulted in Unsuitable Investments for Clients, Stockbroker Fraud Blog, November 29, 2011 Continue Reading ›

Bank of America to Pay $335M to Countrywide Financial Corp. Borrowers Over Allegedly Discriminating Lending Practices

Published on: December 21, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Bank of America Corp. has agreed to a record $335 million settlement to pay back Countrywide Financial Corp. borrowers who were billed more for loans because of their nationality and race, while creditworthiness and other objective criteria took a back seat. All borrowers that were discriminated against qualified to receive mortgage loans under Countrywide’s own underwriting standards.

The settlement is larger than any past fair-lending settlements (totaling $30M) that the US Justice Department has been able to obtain to date. Countrywide was acquired by Bank of America in 2008.

According to the Justice Department, Countrywide charged higher fees and interest rates to over 200,000 Hispanic and black borrowers while directing minorities to more costly subprime mortgages despite the fact that they qualified for prime loans. Meantime, the latter were given to non-Hispanic white borrowers who had similar credit profiles.

SEC Sues SIPC Over R. Allen Stanford Ponzi Payouts

Published on: December 20, 2011 | by Shepherd Smith Edwards & Kantas, LLP

In its latest effort to help investors that lost money in the $7 billion Stanford Financial Group Ponzi scam recoup their losses, the Securities and Exchange Commission is suing the Securities Investor Protection Corporation. Both have been in disagreement over whether Stanford investors qualify for protection against SIPC rules, which are supposed to back brokerage firm client accounts against failure and cover investors for up to $500,000 in losses.

The SEC has said that this coverage should apply to Stanford investors because not only was broker-dealer Stanford Group Company a part of Stanford Financial, but also clients had to set up brokerage accounts to buy the certificate of deposits that their money was placed in. Upon purchase of their CD’s, they were given papers noting that the transaction was SIPC-covered. However, the SIPC, which is not in charge of regulating brokerage firms, contends that because clients’ money was placed in supposedly safe CDs sold by Stanford Financial, investors do not get to avail of this protection.

Now the Commission is seeking a court order that would compel the investor protection corporation to start liquidating Stanford Group Company. This filing is a key step in allowing customers to start getting their money back.

The SEC claims that it is solely authorized to decide whether SIPC should get involved. This is the first time the Commission has pulled rank to force the SIPC to take specific action. If the court grant’s the SEC’s order, SPIC plans to appeal.

Federal authorities seized Stanford Financial in 2009. R. Allen Stanford is accused of running the Ponzi scam and using the money belonging more than 21,000 clients to fund his expensive lifestyle. Investors were promised improbable interest rates that were supposedly spurred by a unique investment strategy.

This week, a hearing to determine whether R. Allen Stanford is fit to stand trial is scheduled to take place. The SEC has sued R. Allen Stanford for securities fraud and he is charged with 23 criminal counts of wrongdoing. Although he remains in federal custody, his criminal trial was delayed to allow him to go into detox for his addiction to anti-anxiety meds and anti-depressants.

One of his defense attorneys claims that the medications and a traumatic brain injury that he sustained when he was beaten in jail have caused him to develop amnesia. Meantime, prosecutors are expected to argue that Stanford is pretending that he severe memory loss.

Allen Stanford’s Move to Trial or Treatment Argued in Court, SF Gate, December 20, 2011
SEC, SIPC ready to rumble over Ponzi payouts, Investment News, December 20, 2011
S.E.C. Files Suit to Recoup Losses in Stanford Case, New York TImes, December 12, 2011

More Blog Posts:
Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order, Stockbroker Fraud Blog, December 5, 2011
Texas Securities Fraud: Raymond James Financial Services Pays Elderly Senior Investor About $1.8M Following Loss of Appeal, Stockbroker Fraud Blog, December 2, 2011
Former Texan and First Capital Savings and Loan To Pay $4.5M for Alleged Foreign Currency Ponzi Scheme, Stockbroker Fraud Blog, November 11, 2011 Continue Reading ›

Daniel “Rudy” Ruettiger Faces SEC Charges Over Pump-and-Dump Scam Involving Sports Drink Company

Published on: December 19, 2011 | by Shepherd Smith Edwards & Kantas, LLP

18 years after he was immortalized in the movie “Rudy,” Daniel Ruettiger and 12 others now face Securities and Exchange Commission charges. They are accused of misleading investor to get them to purchase stock in Ruettiger’s sports drink company Rudy Nutrition. Their alleged pump-and-dump scam resulted in over $11 million in illicit profits.

To settle the SEC securities charges, Ruettiger has consented to pay $382,866, while 10 of the others agreed to final judgments. By settling, they are not admitting to or denying any wrongdoing.

Per the SEC’s complaint, although Ruettiger’s sports drink company manufactured the drink called Rudy, Rudy Nutrition was actually a way for Ruettiger’s and his alleged co-conspirators to run their financial scheme. The Commission says that penny stock promoter Stephen DeCesare, who was brought in to turn Ruettiger’s company into a publicly traded one, was the main organizer of the pump stock scam. After Rudy Nutrition was given the ticker symbol RUNU, DeCesare and disbarred California attorney Kevin Quinn arranged for nominee entities to get three billion RUNU shares. The entities sold nearly one billion of them to investors through the public market. Other penny stock promoters then joined forces with DeCesare to engage in manipulative trading and fraudulent touting.

The SEC says that promoters involved in the pump-and-dump scam took part in manipulative trading so that Rudy Nutrition’s stock price would artificially inflate. Meantime, investors who were allegedly given misleading statements and false information through press releases about the company, as well as via promotional materials, were sold unregistered shares.

The misleading statements and bogus information were sent to millions via mailers, online chat rooms, and videos posted on the Internet. In less than four week, RUNU was trading 3 million shares (up from 720 shares). Within 14 days RUNU’s stock price went from a quarter to $1.05.

In September 2008, the SEC suspended trading because RUNU was delinquent with its periodic filings. This brought the pump-and-dump scam (the alleged fraudsters were conspiring to put out another two billion shares that they would dump at the end of the month) to a halt. The Commission took back Rudy Nutrition securities’ registration in November 2008.

Other participants slapped with SEC charges:
• Rocky Brandonisio, Rudy Nutrition President • Stephen DeCesare, penny stock promoter • Kevin Quinn, attorney and business consultant • Kevin Kaplan, Rudy Nutrition CFO • Pawl Dynkowski, stock promoter • Mehmet Mustafoglu, Rudy Nutrition consultant • Gregg Mulholland, stock promoter • Joseph Padilla, ex-registered representative at Scottsdale Capital Advisors and stock promoter • Andrea Ritchie, registered representative with Scottsdale Capital Advisers • Gary Yocom, registered representative with Thomas Anthony and Associates • Angelo Panetta, stock promoter • Chad Smanjak, stock promoter
Pump-and-Dump Scams
Usually involves stocks that are promoted and then sold when the price goes up enough due to a rise in interest because of the endorsement. This allows those involved in running the pump and dump scheme to make a significant short-term profit.

SEC Complaint (PDF)

More Blog Posts:
FBI Arrests Texas Leader of Pump-and-Dump Scheme, Stockbroker Fraud Blog, March 23, 2011
Ex-Gilford Securities Broker Indicted in International Stock Fraud Scam Involving Pump and Dump of Israeli and Chinese Securities, Stockbroker Fraud Blog, February 19, 2011
Pump & Dump Scam Alleged in $600 Million Lawsuit Against Law Firm Baker & McKenzie, Institutional Investor Securities Blog, April 13, 2011 Continue Reading ›

Well Fargo Advisers to Pay $2 Million to Settle Claims that Broker Sold Unsuitable Reverse Convertible Securities to Seniors

Published on: December 17, 2011 | by Shepherd Smith Edwards & Kantas, LLP

To settle Financial Industry Regulatory Authority securities fraud allegations against one of its brokers, Wells Fargo Advisers will pay a $2M fine, as well as repay an unspecified amount to elderly clients that were defrauded. Over 21 senior investors were reportedly targeted by Alfred Chi Chen, who sold them reverse convertible notes even though the majority of them were retired and/or had never invested in this type of complex instrument. A number of investors were in their 80’s and 90’s.

FINRA says that Chen made over $1M in commissions even as the investors sustained losses. He also is accused of not giving discounts on Unit Investment Trust (UIT) transactions even when clients were eligible. As part of its settlement, Wells Fargo will pay restitution to those that should have but did not get the discounts and those that were sold unsuitable investments.

FINRA Executive Vice President and Chief of Enforcement Brad Bennett said that Wells Fargo did not review the reverse convertible transactions to make sure that they were suitable and that investors were harmed as a result. The SRO also determined that Wells Fargo did not give certain clients that were eligible breakpoint and rollover and exchange discounts when they bought UITs because the financial firm’s procedures and systems were not sufficient to properly monitor unsuitable reverse convertibles and ensure that clients got the discounts for which they were eligible. (Discounts should be offered on UIT sales when purchases go beyond certain thresholds or involve termination or redemption proceeds from another UIT during the initial offering period.)

By agreeing to settle, Wells Fargo is not admitting to or denying FINRA’s allegations.

The SRO has filed a separate complaint against Chen, who allegedly exposed clients to risks that were not in line with their investment profiles. As of June 2008, 172 of the accounts he worked with held reverse convertibles. 148 accounts had concentrations over the 50% of their total holdings. 46 accounts had concentrations of over 90%.

Reverse Convertibles
These interest-bearing notes involve repayment of principal connected to an underlying asset’s performance. The specific terms of reverse convertibles may vary. An investor risks loss if the underlying asset’s value drops under a certain maturity level or during the reverse convertible’s term.

It is important for many elderly investors that their investments not expose them to too much risk. For an elderly senior to lose his/her life savings because a financial firm or broker behaved irresponsibly, committed securities fraud, or made an avoidable mistake is unacceptable.

Wells to pay $2M to settle claims broker sold unsuitable investments to seniors, Investment News, December 15, 2011
Wells Fargo Fined by Finra Selling Structured Notes to Aged, Bloomberg, December 15, 2011

More Blog Posts:
Broker-Dealers are Making Reverse Convertible Sales That are Harming Investors, Says SEC, Stockbroker Fraud Blog, July 28, 2011
RBC Wealth Management Unit Ferris Baker Watts to Pay Investors Restitution Over Reverse Convertible Notes Allegations, Says FINRA, Stockbroker Fraud Blog, October 23, 2010
Wells Fargo Settles for $148M Municipal Bond Bid-Rigging Charges Against Wachovia Bank, Institutional Investors Securities Blog, December 8, 2011 Continue Reading ›

Investors Want JP Morgan Chase & Co. To Explain Over $95B of Mortgage-Backed Securities

Published on: December 17, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Institutional investors that placed their money in over $95B in mortgage-backed securities want the trustees overseeing JP Morgan & Chase. Co.-issued securities to figure out whether certain loans shouldn’t have been included as a result of faulty underwriting. US Bank, Bank of New York Mellon, Wells Fargo & Co., HSBC, and Citibank are the trustees.

PIMCO and BlackRock Inc. are two of the institutional investors requesting the investigation. According to their legal representatives, the group of investors represent over 25% of voting rights on 243 residential mortgage-backed securities. The institutional investors want to know whether mortgages that were not eligible ended up included in the collateral backing the bonds. The investor group is the same one that reached an $8.5 billion securities settlement with Bank of America. (The 22 investors include the Federal Reserve Bank of New York, Black Rock Inc., Goldman Sachs Asset Management, MetLife Inc., and PIMCO). However, the settlement is still pending and has been challenged by other mortgage bondholders.

Related to this current requested probe, JP Morgan and its different arms put out the securities between 2005 and 2007. Included were bonds from Washington Mutual and Bear Stearns. About $450 billion in residential MBS were issued by JP Morgan to investors between 2005 and 2008. Approximately $169 billion of that principal is outstanding.

A lot of the loans were not originated at JP Morgan, but the investment bank and its other entities did buy them. JP Morgan has contented that it should be the originator that should buy back the loans that were part of the securities contract.

According to the New York Times, if investors were to settle with JP Morgan by applying the same loss ratio used in arriving at the Bank of America agreement, this figure would probably hit about $1.9 billion. Meantime, JP Morgan must contend with approximately $31 billion in securities class-action cases.

Because of mortgage-related concerns, beginning in 2010, JP Morgan placed $8.5 billion into its reserves for litigation. At the end of the third quarter, the investment bank’s mortgage repurchase reserves were $3.6 billion.

Meantime, state attorneys generals and the Federal Housing Finance Agency continue to look at how investment banks handled mortgage-backed securities leading up to the housing market. More securities litigation from investors is expected.

Investors target JPMorgan over $95 billion of RMBS, Gulf News, December 16, 2011

Mortgage Investors Put J.P. Morgan in Cross Hairs, The Wall Street Journal, December 17, 2011

Bank of America in $8.5 billion settlement, CNN, June 29, 2011

More Blog Posts:
Bank of America’s Merrill Lynch Settles for $315 million Class Action Lawsuit Over Mortgage-Backed Securities, Institutional Investor Securities Blog, December 6, 2011

FDIC Objects to Bank of America’s Proposed $8.5B Settlement Over Mortgage-Backed Securities, Stockbroker Fraud Blog, August 30, 2011

Some of the SEC Charges Against Investment Adviser Over Alleged Involvement In J.P. Morgan Securities LLC Collateralized Debt Obligation Are Dismissed, Institutional Investor Securities Blog, September 24, 2011

Three Investment Advisers Charged with Massachusetts Securities Fraud

Published on: December 16, 2011 | by Shepherd Smith Edwards & Kantas, LLP

Massachusetts securities regulators have filed three actions accusing investment advisers of defrauding investors of millions. The cases come as the state is getting ready to oversee even more investment advisers in 2012.

One of the securities fraud actions filed is against unregistered adviser John B. Wilson, who regulators want to ban from the securities industry for life. Wilson is accused of defrauding 25 investors who gave him over $1.5M. The funds were placed in JBW Capital LLC.

Wilson lost over 90% of the funds in 2 trades he made during one month in ’08. He has admitted to having a trading addiction.

In the second Massachusetts securities case, RIA Daniel A. McKenna allegedly raised over $1M from investors over a 17-year period. He did this by selling shares in Principle Profits Asset Management. In fact, the shares were worthless. He also allegedly persuaded investors to lend his company money, which he never paid back.

Meantime, state regulators are accusing another RIA, Sean Michael O’Brien and Andover Equity Investment Group LLC of using clients’ money to pay for his own expenses, charging “exorbitant” fees, and issuing untrue statements to investigators. For example, he allegedly told the state that TD Ameritrade Holding Corp. division “thinkorswim,” which was his custodian broker-dealer, never asked him about his advisory fees. (His management fee was 15.54% even though the average for the industry is .5%-2%.) However, it turns out that TD Ameritrade asked O’Brien about the fees and eventually terminated his use of the company’s platform.

The state wants investors to get their money back. Regulators also want to take back the registrations of both O’Brien and McKenna.

Currently, there are 739 RIA’s under Massachusetts’ watch. Per the Dodd-Frank Wall Street Reform and Consumer Protection Act, which mandates that midsize investment advisers go from federal to state supervision next year, another 200 more RIA’s will fall under the state’s watch. (Midsize advisers have assets ranging from $25M and $100M).

Referring to these latest securities actions, Massachusetts Secretary of the Commonwealth William Galvin said that they show the state’s willingness to go after investment advisers that have violated securities laws.

Our stockbroker fraud lawyers represent investors throughout the US. If you believe that a registered investment adviser or broker-dealer may have defrauded you, please contact our securities fraud law firm. You may have a Massachusetts securities claim on your hands.

Over the years, Shepherd Smith Edwards and Kantas LTD LLP has helped thousands of investors throughout the US to recoup their investment. Your first consultation with us is free.

Massachusetts Signals Strict Oversight Of Investment Advisers, The Wall Street Journal, December 14, 2011
Massachusetts charges three advisers with varying flavors of fraud, Investment News, December 18, 2011

More Blog Posts:
Colorado Securities Fraud: Universal Consulting Resources LLC and Owner Richard Dalton to Pay $15.8M to Settle SEC Lawsuit Over Ponzi Scam, Stockbroker Fraud Blog, December 9, 2011
LPL Financial Ordered to Pay $100K for Lack of Adequate Oversight that Resulted in Unsuitable Investments for Clients, Stockbroker Fraud Blog, November 29, 2011
Texas Securities Fraud: Unregistered Adviser Confesses to Selling Almost $400K in Promissory Notes and Investments Despite Cease and Desist Order, Stockbroker Fraud Blog, December 5, 2011 Continue Reading ›