Investment Fraud Lawyer Blog

Elder Financial Abuse Reaching Crisis Levels

Mon, 14 May 2012 16:10:12 -0500

Elder financial abuse is an “epidemic” and likely to become much worse given that 77 million baby boomers are entering their so-called “retirement” years (See “Golden years? Financial elder-abuse now epidemic,” Andrew Osterland, InvestmentNews). Between 500,000 and 5 million elders are abused, neglected or exploited each year, and the abuse is often unreported. “Elders can be afraid to report abuse, for a variety of reasons,” one practitioner was quoted as saying, adding: “In many cases, they may depend on the abuser and fear reprisals from them. They may be afraid of being placed in a nursing home or dread the stigma of domestic violence.”

Client Trust - Why Honest Financial Advice Is So Important

Mon, 14 May 2012 15:56:29 -0500

Approximately 81% of 974 surveyed investors said that they expect their financial advisor to be able to explain the array of investment products on the market today (See InvestmentNews, “Clients: So many investment products, so little understanding”). “Advisers must stay on top of the latest investment products because many investors say they're overwhelmed by investment choices and find many to be overly complex,” according to the article.

Inland American Real Estate Trust Under Investigation

Fri, 11 May 2012 16:26:04 -0500

Inland American Real Estate Trust Inc. is being investigation by the Securities and Exchange Commission according to that firm’s quarterly report. The SEC's investigation is reportedly focusing on fees. Inland American is the industry’s largest nontraded real estate investment trust, and has $11.2 billion in real estate assets. Inland American is one of five REITs sponsored by The Inland American Real Estate Group of Companies Inc.

Chicago Professors Argue That Governmental Approval Should Be Required For Wall Street's Exotic Financial Products

Wed, 09 May 2012 17:10:50 -0500

Wall Street is peddling snake oil – new financial products that are the equivalent of bottles of medicine with labels like “Dr. Bartlett’s Beneficent Balm – Boon to Mankind” – and they should be regulated as such, according to University of Chicago professors Eric A. Posner and E. Glen Weyl. The FDA protects consumers from poison sold as medicine and we should do something similar for financial products that “seem at least as extreme as the dangers of medicines,” they argue. (See “How to Prevent a Financial Overdose,” by Gretchen Morgenson, New York Times).

Have Securities Regulators Become Too Chummy With Wall Street?

Mon, 07 May 2012 16:53:16 -0500

Susan Antilla’s recent Bloomberg column summarizes the securities regulatory enforcement activity in 2011 as a series of breaks, favors and waivers doled out by the regulators to big Wall Street banks. To be sure, the regulators often lower the boom on the small players, but Wall Street is another matter. (“Wall Street’s Big Swingers Get the Biggest Breaks: Antilla,” Bloomberg).

Regulators Sanction Major Wall Street Firms for Improper Sales of High-Risk ETFs

Thu, 03 May 2012 13:58:36 -0500

The Financial Industry Regulatory Authority (FINRA) announced that it ordered Citigroup Global Markets, Morgan Stanley, UBS Financial Services, and Wells Fargo Advisors to pay more than $9.1 million for failure to supervise and failure to have a reasonable basis for recommending selling leveraged and inverse exchange traded funds. Each of the four firms sold billions of dollars of these leveraged and inverse exchange traded funds.

Wall Street Firms Apparently Planning Massive Job Cuts

Wed, 02 May 2012 16:08:31 -0500

Wall Street banks could soon cut as many as 21,000 jobs in New York alone, say Wall Street consultants and recruiters. Worldwide cuts could be even larger (“Large layoffs loom on Wall Street,” Stephen Gandel, CNN Money). While the stock market is up this year, and many smaller investment banks have been hiring, and the big banks have reported better than expected earnings for the first quarter, Wall Street executives believe they have too many employees.

More Bad News for Nontraded REITs

Tue, 01 May 2012 12:17:14 -0500

The Financial Industry Regulatory Authority (FINRA) is investigating and considering legal action against a “captive” broker-dealer of a real estate investment company for the second time in three years. (See InvestmentNews article by Bruce Kelly entitled “Nontraded REITs’ B-D faces another probe”).

Many Exotic CDs and Structured Notes Involve High Costs and Serious Risks

Mon, 30 Apr 2012 16:10:21 -0500

With interest rates stuck at record lows, and retirees or those on the brink of retirement looking are for higher yields, Wall Street has capitalized on this dilemma by selling an array of alternative products like "structured notes" that promise higher yields but come with higher (often undisclosed) risks, and by marketing dividend stocks as alternatives to bonds, when, in fact, they are riskier than bonds.

Atlanta Investment Adviser Fined for Accepting Undisclosed Kickbacks from Hedge Funds

Mon, 30 Apr 2012 15:37:45 -0500

The U.S. Securities and Exchange Commission announced that it has ordered Montford Associates, an Atlanta investment advisory firm, and Ernest Montford Sr. to pay a penalty of $650,000 for failing to disclose payments they received from a hedge fund to which it steered clients -- mostly nonprofit organizations – in violation of securities laws. The acts were unlawful “because Respondents had represented that they did not receive any compensation in connection with giving advice to their clients” (“SEC penalizes investment adviser,” by Dan Chapman, Atlanta Journal Constitution). The SEC also barred Montford from associating with any investment adviser.

Financial Shenanigans at NBA Players Association?

Sat, 28 Apr 2012 15:50:30 -0500

The U.S Attorney's Office in Manhattan is investigating the National Basketball Players Association after NBPA President Derek Fisher asked for independent reviews of its finances and business practices, according to an InvestmentNews article (“Financial planner involved in NBA players’ union probe: Report”).

America is at a Crossroads According to Former Treasury Secretary

Fri, 27 Apr 2012 15:29:49 -0500

Robert Rubin, former managing partner of Goldman Sachs, former Treasury Secretary, and former Chairman of Citigroup, says there is more to worry about in today’s fiscal environment than at any other time in his life. “[I]t is absolutely prudent that we prepare for the worst,” Rubin told a New York TradeTech audience last month (See Ben Baris’s article in Institutional Investor, “’Prepare for the Worst’ Say Ex-Treasury Sec Robert Rubin”).

Regulators Plan Legal Actions Over Improper Sales of ETFs and ETNs

Wed, 25 Apr 2012 10:05:54 -0500

The Financial Industry Regulatory Authority (FINRA) announced plans to file enforcement actions against certain brokerages in connection with unsuitable sales of leveraged and inverse leveraged exchange-traded funds (ETFs), as well as for failure to train their brokers who sell them (see Reuters article by Suzanne Barlyn and Jessica Toonkel entitled “FINRA to bring cases over leveraged, inverse ETFs”). The article cites FINRA enforcement chief Bradley Bennett as the source of this information, and notes that he refused to identify the broker-dealers that FINRA plans to sue.

The Risk of Municipal Bonds Continues to Rise

Wed, 25 Apr 2012 09:49:11 -0500

State and local issuers of municipal bonds are in trouble, but most municipal bond holders are not – at least not yet. While waves of default predicted by analyst Meredith Whitney several years ago have not yet materialized, lower revenues and unfunded liabilities are creating a slow-motion train wreck for many state and local governments. (See “Munis may take it in the teeth after all,” by Andrew Osterland, InvestmentNews).

Greater Volatility Equals Lower Returns

Tue, 24 Apr 2012 13:30:33 -0500

A recent study has concluded that investments that have higher volatility generate lower returns for investors. For many years, it has been a basic precept of modern portfolio theory that the price of opting for lower risk is lower reward. That is bunk, according to Robert Haugen, a former professor of finance at the University of Wisconsin and current president of a firm that produces quantitative investment research for subscribers. “We found that in every one of the world's markets, higher volatility equals lower returns,” Mr. Haugen was quoted as saying, adding: “Does this fly in the face of modern portfolio theory? You're damn right it does.” (See “Less risk offers more reward, study finds,” InvestmentNews).