New York Securities Lawyers Blog

LPL Reportedly Under Fire From State Regulators

Mon, 01 Apr 2013 17:28:41 -0500

The broker-dealer LPL, Linsco Private Ledger, has been in the news a lot recently - for all the wrong reasons. LPL was even recently featured in The New York Times for its frequent "tangles" with state and federal regulators.

LPL is the nation's fourth largest brokerage firm, with more than 13,000 brokers who currently service over 4 million customers. LPL attracts brokers from other brokerage firms by reportedly paying a higher percentage of the commissions generated directly to the broker - roughly 80% at LPL versus as low as 15-25% elsewhere. While this model can be very lucrative for well-minded brokers, this model can also attract deceitful brokers who do not have their clients' best interests in mind and seek to skirt the law.

LPL's network of brokers is very spread out by brokerage firm standards, with many brokers operating out of an office of only one or two individuals - versus other brokerage firms which may have up to several hundred brokers under one roof.

The law requires that LPL supervise its brokers in remote and small offices as if they were under the main office's roof. For LPL, this can make supervision over these brokers very challenging, and oftentimes ineffective. In just the past year and a half, LPL was penalized by regulators in five different states for failing to supervise its brokers properly.

Mr. William Galvin, the Massachusetts secretary of the commonwealth, indicated to the New York Times that in a recent investigation, "[w]hat we really saw was a complete lack of supervision."

Several of these investigations reportedly stem from the sale of Real Estate Investment Trusts (REITs) to unsophisticated investors. Unsophisticated investors may not be aware of the risks inherent to REIT investments such as illiquidity and substantial loss of principle. They may also not be aware that REITs generally pay a high commission to the broker and the brokerage firm who sold it.

Unscrupulous brokers may sell REITs as safe, income producing investments to unsuspecting, unsophisticated investors for whom they are not appropriate, in order to get the higher commission.

The attorneys at Malecki Law engage in securities litigation and arbitration in forums such as FINRA, where they have handled many cases involving firms' failures to supervise their registered representatives. If you believe you have lost money as a result of questionable conduct by your broker, please contact an attorney at Malecki Law to determine if you may be able to recover some or all of your losses.

Jenice Malecki to Appear Tonight on The Willis Report on Fox Business

Tue, 26 Mar 2013 14:35:18 -0500

Jenice Malecki of Malecki Law will be appearing on Fox Business News tonight, March 26, 2013 between 6pm and 7pm.

Ms. Malecki will be appearing on The Willis Report to discuss the recent Rasmussen Reports that indicate 50 percent of Americans want the government to break up the country's big banks. The report also found that only 23 percent of Americans oppose such a breakup, with 27 percent remaining undecided.

Critics have said that the size of several US banks are a threat to the country's economy. This notion became widely known during the recent recession as "Too Big To Fail." The US Attorney General recently made a shocking revelation that some banks are even too large to even prosecute effectively.

Banks in this country have not always been as large as we have seen in recent years. Much of the growth in these banks has not necessarily been organic, but rather is the result of massive mergers and acquisitions between several banks.

In fact, shortly following the Great Depression, Congress passed the Banking Act of 1933, widely referred to as the Glass-Steagall Act, which contained four provisions that significantly limited the affiliations between commercial banks and securities firms. This act made mergers between commercial banks and investment banks very difficult, if not impossible.

However, over the 60+ years this act was in effect, its restrictions were gradually eroded. In 1999, the Glass-Steagall restrictions on banks were repealed under the Gramm-Leach-Bliley Act, and then-President Clinton publically announced that "the Glass-Steagall law is no longer appropriate."

The repeal of Glass- Steagall opened up the door for massive mergers between commercial and investment banks such as JP Morgan and Chase Bank, effectively changing the banking landscape in the United States.

Jenice Malecki to Appear on Fox Business News on March 21, 2013 at 5pm - Topic: SEC Digging Into Fund Fees

Wed, 20 Mar 2013 17:28:34 -0500

Jenice Malecki of Malecki Law will be appearing on Fox Business News tomorrow, March 21, 2013, at 5pm.

If you have suffered losses in an investment with a hedge fund or other financial adviser, it is your right to consult with an attorney to explore your rights. Contact the securities lawyers at Malecki Law for a free consultation.

Jenice Malecki of Malecki Law Speaks with the Wall Street Journal About "Ending Up In Arbitration"

Wed, 20 Mar 2013 14:39:38 -0500

Securities attorney Jenice Malecki spoke recently with Wealth Management at wsj.com's Caitlin Nish about what makes a strong investor claim against a broker and the steps that lead up to brokers having to defend themselves in arbitration.

To watch the video click here.

Investors who have lost money because of bad advice, unsuitable investment recommendations and misconduct by their financial advisor may seek to recover their losses through arbitration.

Arbitration is known as an "alternative dispute resolution" process. Rather than file a lawsuit in court in front of a judge and jury, an investor can sue their financial advisor in arbitration in front of a panel of one to three neutral people, known as "arbitrators." These arbitrators will hear the evidence and reach a decision regarding the claim.

Most securities arbitrations take place under the rules of the Financial Industry Regulatory Authority (FINRA), as virtually all brokerage firms require members to arbitrate customer complaints upon the customer's request and then create customer agreements containing arbitration clauses.

Chances are that if you have a brokerage account, you have already agreed to arbitrate your claims. You may even be bound to do so.

Whether you choose arbitration or are required to participate in it, most arbitration uses rules and procedures similar to those used by the courts to resolve claims. During the proceedings, the arbitrators will determine what evidence is heard and then will consider all evidence presented to reach a decision. An investor usually receives the arbitrators decision about if and how much they won within thirty days of the close of the arbitration proceeding.

If your investment losses are putting you on the road to arbitration, it makes sense for you to contact an attorney with experience handling such securities claims, such as those here at Malecki Law for a free consultation.

Regulators Consider High-Frequency Trading as Potentially Wash Sale Transactions

Wed, 20 Mar 2013 13:45:36 -0500

The Wall Street Journal reported on March 18, 2013 that U.S. Regulators, including the Commodity Futures Trading Commission (CFTC) and the Financial Industry Regulatory Authority (FINRA) are reviewing trading of high-frequency firms to determine if they are engaging in prohibited transactions, such as "wash" trades. The Article stated that the Regulators are reviewing records of primarily two exchanges, the CME Group, where the majority of wash trades have occurred, and the InterncontinentalExchange, Inc.

The Article identified that regulators are concerned that the exchanges do not have appropriate systems in place to identify or stop wash trades, especially in light of recent technical glitches leading to pronounced losses, including the Knight Capital Group and Facebook debacles in 2012.

Wash trades are when the same party places bids and asks for the same security, which causes there to appear increased activity in the security, which may affect its value, causing gains or losses to other investors who may be legitimately interested. In this way, a market participant manipulates the price of the security, prompting other participants to enter the market.

The Article identified that securities laws generally require a finding that the prohibited trading was intentional, although changes brought about by the Dodd-Frank Wall Street Reform and Consumer Protection Act allow the CFTC to prosecute firms that disrupt the market, even when not intentional. The Article also mentioned that FINRA officials are proposing to a legal standard to wash trades that would remove the requirement of "scienter," or a knowledge or wrongness. Such a change in the law may make it easier for regulators to enforce the laws, but may have a deterrent effect to legitimate trading strategies by firms who happen to place bets on both sides of the market, but for different reasons. In such an instance, the firm could claim that it did not intentionally enter into what could be considered a wash trade.

Regulators such as the Securities and Exchange Commission (SEC) have regularly brought investigations and enforcement proceedings against market participants for alleged wash trades or sales, as well as for other forms of perceived market manipulation.

The attorneys at Malecki Law represent individuals in regulatory investigations and enforcement actions, including those involving alleged wash trades in forums such as FINRA and before the SEC. If you believe you have become a potential witness or subject to a subpoena requesting information from a U.S. Regulator, please contact an attorney at Malecki Law to determine the most appropriate course of action to follow.

FINRA Fines Ameriprise and its Clearing Firm $750,000 For Failing to Supervise Jennifer Guelinas

Tue, 19 Mar 2013 09:39:00 -0500

The Financial Industry Regulatory Authority, (FINRA) issued a news release on March 4, 2013 announcing that it had fined Ameriprise Financing Services, Inc. and its affiliated clearing form American Enterprise Investment Services, Inc. $750,000 for failing to have reasonable supervisory systems in place to monitor wire transfer requests. In the News Release, FINRA disclosed that its investigation was related to Ameriprise's former registered representative Jennifer Guelinas, who apparently converted approximately $790,000 over four years from two of her clients by forging wire requests that paid in to accounts she controlled.

According to the News Release, Ameriprise failed to detect several "red flags," including that Ms. Guelinas submitted forged wire requests from a customer's account to an account that appeared to be under her control. FINRA further disclosed that on at least three occasions where Ameriprise initially rejected wire requests, they were then accepted on either the same day or another day after simply being resubmitted by Ms. Guelinas. The News Release stated that Ameriprise also accepted one request after it had begun to investigate Ms. Guelinas, and accepted another wire transfer request that was submitted by Guelinas after she was terminated, though the firm recognized its mistake in time before the money was accessed.

FINRA Rules require that securities firms have and enforce reasonable supervisory procedures in place to monitor each registered representative's conduct to ensure that they are acting in compliance with securities laws. According to the News Release, Ameriprise did not have adequate reasonable supervisory procedures in place. The FINRA News Release stated that Ameriprise had already paid full restitution to the two customers for losses in their accounts.

The risks of not having adequate supervisory procedures in place are well evidenced in this enforcement action by FINRA. It appears Ms. Guelinas took advantage, knowing that Ameriprise had no effective supervision in place relating to wire requests. The securities laws, interpretive materials as well as applicable case law make clear that securities firms serve as the gatekeepers to the securities industry, and are the first line in defense against securities fraud.

Citigroup Reportedly Agrees to Settle Class Action For $730 Million

Tue, 19 Mar 2013 09:14:31 -0500

It has been reported that New York based Citigroup has agreed to pay $730 million to settle claims that it misled investors with respect to nearly 50 bond and preferred stock offerings over a period of more than 24 months between 2006 and 2008. The investors' claims were said to be based on misleading statements from the bank over Citigroup's exposure to mortgage backed securities, its loss reserves, and the credit quality of some of its held assets.

Before the settlement can be finalized, it must be approved by the US District Court in Manhattan. If approved, it would be the second largest financial crisis related settlement to date - trailing only Bank of America's $2.43 billion settlement related to its purchase of Merrill Lynch. According to the Wall Street Journal, Citigroup claimed to have done nothing wrong and stated that it settled to avoid the trouble and costs of extended litigation.

This is just one more of many such settlements that have resulted from the financial crisis, totaling billions of dollars that have been returned to investors. Just last year, it was reported that Citigroup paid $590 million to settle allegations by investors that it misled shareholders about other problems in 2007 and 2008. Wachovia and Bank of America, among others, have also been reported to have recently reached settlements in excess of $500 million with investors.

The events underlying cases such as this one, brought on behalf of classes of investors are large, striking examples of how banks mislead investors on the grandest scale. However, class actions are not the only avenue investors have to recover their losses.

Misled and defrauded investors have the option to opt out of large class actions and pursue their claims independently. While joining a class action may seem like the easy way for a victimized investor to recoup their losses, class actions have been criticized for returning less to individual victims than could have been obtained had each investor brought their own individual case.

Investors who have suffered losses and wish to get back as much of their losses as possible, should call the securities fraud attorneys at Malecki Law for a free consultation to explore their rights.

FINRA Permanently Bars Florida-Based Broker Jeffrey Rubin for Unsuitable Investment Recommendations to NFL Players

Thu, 14 Mar 2013 10:25:24 -0500

The Financial Industry Regulatory Authority (FINRA) issued a news release on March 7, 2013 announcing that it had permanently barred Mr. Jeffrey Brett Rubin from the securities industry as a result of his unsuitable investment recommendations and unapproved securities transactions to 31 NFL Players. In FINRA's news release and in the underlying Letter of Acceptance, Waiver and Consent (AWC), FINRA detailed that Mr. Rubin was recommended that one of his clients, an NFL player, invest $3.5 million, a majority of his liquid net worth, in to high-risk securities, including a large $2 million investment in an Alabama casino, resulting in losses of approximately $3 million.

Moreover, Mr. Rubin is alleged to have sold this investment away from his firms Lincoln Financial Advisors Corporation and Alterna Capital Corporation, where he was successively licensed as a broker between March 2006 and June 2008. Alterna Capital Corporation terminated or withdrew its FINRA registration on September 24, 2009, according to its FINRA CRD report. Since then, it appears that the majority owner of Alterna Capital Corporation, Robert Lloyd Konrad, Jr., has continued the business of managing professional athlete's money through Alterna Financial.

According to reports, Mr. Rubin apparently continued to refer additional NFL players while registered as a broker with Alterna and International Assets Advisory, LLC. In total, FINRA found that over about a three year period, Mr. Rubin referred approximately 30 players, who invested approximately $40 million in the same Alabama casino project. For his referrals, Mr. Rubin was given a 4% ownership stake in the casino project, as well as $500,000 from the project promoter, seemingly placing his interests ahead of his clients.

Mr. Rubin operated Pro Sports Financial, a Florida-based company, claiming to provide financial related "concierge" services to professional athletes. Mr. Rubin further disclosed that in April 2008, the Internal Revenue Service filed a federal tax lien against Mr. Rubin for over $400,000. A second federal tax lien was filed in June 2009. It is reported that Mr. Rubin failed to disclose these liens on his Form U4, a violation of several FINRA Rules.

Brokers are required by FINRA Rules and securities laws to only recommend investments that are suitable to their clients, and must make an investigation as to each client's financial background in order to do so. Further, brokers must notify their employing firms of each investment they recommend and each business they intend to work for outside of their primary employment through which they are registered.

In one comparable matter successfully recently handled by Malecki Law, a case on behalf of about 80 individuals was led to successful completion related to a Ponzi scheme "sold away" from his employing brokerage firm, similar to Mr. Rubin. That case was perpetrated by Mr. Robert Van Zandt from the Bronx, New York, who was a registered person and ran an accounting office in the Bronx for over twenty years, and since at least 2000 was involved to some degree in real estate investment. He solicited individuals for his "investments" from his tax preparation business, marketing the investments in "real estate" as safe, guaranteed and producing a 9% annual interest return. During the time that he sold his "investments," Mr. Van Zandt was a registered representative of a major FINRA-registered broker-dealer. Malecki Law's action raised causes of action including the broker-dealer's failure to supervise Mr. Van Zandt's actions, which resulted in and caused losses to Malecki Law's clients.

The attorneys at Malecki Law engage in securities litigation and arbitration in forums such as FINRA, which is what it looks like some of these NFL players may need help with. If you believe you have lost money as a result of inappropriately marketed or unsuitable investments, please contact an attorney at Malecki Law to determine if you may be able to recover some or all of your losses.

FINRA's March 7, 2011 News Release can be found here.

Jenice Malecki Appears on NBC's TODAY SHOW on March 14, 2013

Wed, 13 Mar 2013 14:42:34 -0500

Jenice Malecki appeared on NBC's Today Show tomorrow morning, March 14, 2013, to discuss the injunctive action filed by Spanx against Yummie Tummie. The video of Ms. Malecki is can be found here.

Yummie Tummie holds three design patents for its camisole products and at the end of 2012 informed Spanx that it was infringing upon those patent. Correspondence and negotiations ensued, resulting in Spanx filing an injunctive action in its home court in Georgia to preemptively stop Yummie Tummie from enforcing its patents. Yummie Tummie brought a prior infringement action against Maidenform in the United Stated Federal Court for the Southern District of New York, which case has been settled.

The issue will likely surround whether the patents are valid or invalid and whether the camisole passes the obviousness test. There are two fundamental tests: (1) the invention must be novel, not just a variation, and (2) it must be unobvious, something that someone with ordinary skills, would not have imagined. This will surely be a very fact intensive battle and this preemptive strike by Spanx is an aggressive move by a larger player exerting their financial muscles in order to attempt to control the course of the litigation against Yummie Tummie.

Patents are generally enforced for twenty years, with infringement actions allowed to be commenced starting eighteen months after public filing (when the public gets notice of the filing). Trademarks, on the other hand, if enforced, can last forever.

While this looks like an ugly battle over control of the bulge, most cases do settle and it remains to be seen if Spanx's move is a strong negotiation tactic. While fact specific, an interesting question will be whether Spanx filed patents on all their other products but not these, and why.

Malecki Law represents the commercial litigation needs of individuals and businesses, both local and nationwide, in New York Federal and State courts. The Spanx case will require a command of dispute resolution, namely the processes of litigation, arbitration, and mediation, as well as appeals. At Malecki Law, our seasoned staff of commercially-versed attorneys has the experience to successfully represent clients in litigation matters of banking, insurance, securities, real estate, antitrust, contract, partnership, product liability, employment and more. Our thorough knowledge of both litigation and alternative dispute resolution opportunities give our clients opportunities to gain the peace of mind and entitlement to justice that our legal system provides.

Ms. Malecki is a well-known New York securities and commercial litigation attorney and has been a FINRA arbitrator and Chairperson. In 2012 Ms. Malecki was named as a Top Attorney by Super Lawyers and the National Law Journal, being featured in the New York Times Magazine, New York Magazine, National Law Journal and other related publications. She appears regularly on TV, in the news and on the radio. She is a frequent bar association and law school speaker, as well as a seasoned authority on New York law.

Ms. Malecki is a member of and has been on the Board of Directors (and an Officer of) the Public Investors Arbitration Bar Association (PIABA), as well as has been a member of the Securities and Exchanges Committee at the New York City Bar Association, as well as the New York State Bar Association. She has spoken at the Practicing Law Institute (PLI) and New York County Lawyers Association on several panels, and at both Brooklyn Law School and New York Law School, in addition to speaking annually at PIABA's year-end conference. Ms. Malecki has appeared on ABC Eyewitness News, Bloomberg Television, China TV, EBR TV and on other syndicated shows and networks. She also has appeared on Steve Forbes' in-flight radio show "America's Most Influential Women in Government, Technology, Business, and the Law", as well as other nationally syndicated radio programs. She and her cases have been and continue to be cited in numerous industry publications, including The Wall Street Journal, The New York Times Forbes and Newsweek. Early in 2013, The Wall Street Journal will feature Ms. Malecki in an educational video clip about the arbitration process at FINRA, the Financial Industry Regulatory Authority.

Investors Should be Wary of Student Loan Securities Investments

Mon, 04 Mar 2013 12:35:36 -0500

The Wall Street Journal reported on March 4, 2013 that Sallie Mae sold $1.1 billion of securities backed by private student loans, noting that demand for the offering was fifteen times that. Related to this offering, the Wall Street Journal noted that a new platform was being rolled out by SecondMarket Holdings Inc. that would enable lenders to directly issue student-loan securities to investors.

The potential problem with the securitization of student loans is the increase in default by borrowers on the underlying student loans. The Federal Reserve Bank of New York has stated that 31% of people paying back student loans were late on their payments by 90 days or more, an increase from 24% in 2008, as reported by the Wall Street Journal article.

Investors who are offered or are considering investing in student loan backed securities should keep in mind the spike in pre-recession investing in mortgage-backed securities that was then followed by massive defaults on payments of those underlying mortgages, which in some ways deepened the scale and effect of the 2008 recession. While student loan backed securities may lead to greater yields, these investments would most likely also include increased risk of loss. Investors should remain wary of including this investment in their portfolio, especially given the tough employment market and increase in late payments.

Often times, investments are marketed and sold without complete disclosure about the risks attributable to those investments, or are simply recommended to the wrong sort of investor. The stripping of or failing to provide complete risk disclosures may be deemed securities fraud, and depending on the investor, such a recommendation may be deemed an unsuitable investment. Financial Industry Regulatory Authority (FINRA) Rules require that under certain circumstances, recommendations must also be suitable when made to institutional customers.

The attorneys at Malecki Law specialize in securities litigation and arbitration in forums such as FINRA. If you believe you have lost money as a result of inappropriately marketed or unsuitable investments, please contact an attorney at Malecki Law to determine if you may be able to recover some of your losses.

Jenice Malecki of Malecki Law To Appear On On The American Radio News Afternoon Drive Show With Ernie & Rachel to Discuss The SEC's Current Investigation of Chesapeake Energy's Aubrey McClendon

Fri, 01 Mar 2013 11:44:24 -0500

Jenice Malecki of Malecki Law will be appearing on the American Radio News Afternoon Drive Show with Ernie & Rachel tonight at 5:15pm est to discuss the current SEC investigation of Aubrey McClendon, Cheseapeake Energy's CEO.

Central to the investigation is a controversial program within the company that grants McClendon a share in every well drilled by Chesapeake, so long as he pays his share of the cost. Since the program began, Mr. McClendon has taken out hundreds of millions of dollars in personal loans from companies that invest in Chesapeake. This move did not sit well with shareholders.

Ms. Malecki will discuss how given McClendon's position at the publicly-traded company, the question of what was disclosed to investors, when it was disclosed, and whether there were actual conflicts of interest that disadvantaged investors, especially, whether these deals were priced to the company's advantage or disadvantage is at the heart of the current situation. If the allegations are correct, and all required information was not disclosed to investors and conflicts of interest were present, this is a fraud, plain and simple.

Ms. Malecki will also discuss McClendon's role as Chief Executive, and that by virtue of his position, he did not have the right to seize opportunities to benefit himself at the expense of investors. Situations such as this one, assuming the allegations to be true and accurate, is what tarnishes our market and kills our economy globally, a lack of honor and an inability for investors to trust corporate governance. When companies act in such fashion, as alleged, it is bad for America.

Wells Fargo Advisors, LLC is Ordered to Repurchase Fannie Mae Preferred Shares in FINRA Arbitration

Thu, 07 Feb 2013 12:41:52 -0500

On February 6, 2013, the Financial Industry Regulatory Authority (FINRA) announced that a public customer was awarded an award of full rescission against Wachovia Securities, LLC, doing business as Wells Fargo Advisors, LLC ("Wells Fargo") for the entirety of Fannie Mae Preferred shares recommended by Wells Fargo. By awarding full rescission, the arbitrator required Wells Fargo to repurchase the Fannie Mae Preferred shares at the same price they were sold to the customer. The arbitration award is attached here.

According to the award, the arbitrator found that Wells Fargo was liable for negligence, negligent supervision, fraud and breach of contract as a result of the sale of the Fannie Mae Preferred shares. Billions of dollars of Fannie Mae Preferred shares were sold by broker-dealers like Wells Fargo to investors before the U.S. Government placed Fannie Mae in conservatorship and stopped payments of preferred dividends to investors, but after we believe such broker-dealers were aware that those preferred shares were much riskier than how they were promoted to investors.

In our opinion, Fannie Mae Preferred shares were often endorsed as a safe investment by brokers and broker-dealers, especially given that Fannie Mae was considered a quasi-governmental entity. However, as early as February 2008, we believe many broker-dealers were well aware of Fannie Mae's exposure to real estate liabilities. On March 10, 2008, Barron's reported that Fannie Mae's solvency would be tested by a growing number of mortgage defaults and falling home prices. Despite these in-house understandings of the risky nature of Fannie Mae Preferred shares, many broker-dealers continued to promote the investment as safe, and provided their brokers with research material to further promotion of the shares. Like many other broker-dealers, Wells Fargo, recommended the Fannie Mae Preferred shares to investors who sought safe investments, according to the award.

The arbitrator in the February 6, 2013 award made a point of describing how the broker was not at fault. The broker acted based on research she was provided by Wells Fargo, so Wells Fargo was found solely liable for the investor's losses. Essentially, the award states that Wells Fargo caused the recommendation of unsuitable investments to the investors.

If you believe you have lost money as a result of Fannie Mae Preferred shares, or because of some other investment, please contact an attorney at Malecki Law to determine if you may be able to recover some of your losses.

UBS to Reclassify Bond Investors as "Aggressive"

Mon, 04 Feb 2013 14:16:48 -0500

Fox Business reported recently that UBS is planning to reclassify many of its clients who are invested heavily in bonds as "aggressive" investors.

While the report indicates this is being done as a result of growing bearishness in the bond market, some are speculating that this move is being done in an attempt to reduce the firm's exposure to future litigation. How an account or an investor is categorized by a broker-dealer's internal paperwork can have a substantial effect on how that account is treated internally - a fact many investors are unaware of when they open their account. If an injured client later sues the firm in a FINRA arbitration or in court, this classification can also have an impact on the success of their case.

Firms can change the classification of an investor/account with "non consent" or "negative consent" letters, which require no affirmative act or consent on behalf of the investor to change the account. It is reported that UBS will be using just these type of letters to reclassify its clients' accounts.

Such a reclassification may come as a surprise to investors who invested in bonds as safe and conservative way to earn income on their investment, rather than invest in the often riskier stock market. Investors who receive these letters will likely have serious questions for their brokers, such as, "If a bond portfolio is no longer conservative, what is?" while their brokers may be left without a good answer. As a result, brokers are reportedly concerned that they will lose customers.

One has to ask the question, "If it was sold as safe, and the client wanted a safe investment, is it not a broker's obligation to, at a minimum, have a discussion with the client as to how to adjust the portfolio to maintain safety for the client, rather than change the client's risk profile in a form letter to protect the firm? Can this really be called good faith and fair dealing with the customer? It is hard to imagine that it can.

As major financial institutions, shouldn't firms like UBS not simply tell their clients, "You were conservative, but now we say you're aggressive," but rather that they have this firm-wide, bearish outlook on bonds and suggest a more appropriate reallocation? Wouldn't that be the more prudent and appropriate course of action?

Apple Reverse Convertible Notes Mean Potentially Huge Losses for Investors Who Bought Them From UBS and Other Banks

Mon, 28 Jan 2013 13:38:19 -0500

Those who invested in many of the commonly called "Apple reverse convertibles," now find themselves facing huge potential losses. But all hope is not lost, as investors may be able to recoup their losses.

The plight of these investors has been well documented recently.

What would you do if your broker tells you that you just bought Apple stock at a price of over $700 a share, even though after this past week's collapse left the price hovering below $440? Now what would you do if you found out that you wound up with this "bum deal" by buying a product that was issued by your broker's firm?

Jason Zweig of the Wall Street Journal addressed this situation in his recent report on how individual investors lost potentially hundreds of millions of dollars in structured products linked to Apple stock, while the firms and brokers who sold them made a profit.

These products were typically marketed to investors as being like bond investments, but promised substantially higher interest rates between 6-12%. However, this came with a catch - if the stock fell more than 20% or so by the date of maturity, the bonds morph into shares of the underlying stock on the maturity date. This means an enormous, sudden loss to the investor.

Over $722 million of these investments have been sold. Many investors who bought these investments, such as UBS's "trigger yield optimization notes" in the past year have seen the value of the underlying Apple stock drop from over $700 to south of $440 per share, which means that these investors are staring down the barrel of an enormous loss - estimated to be around 30%. At the same time, the banks that sold these products reaped a large profit, sometimes nearly 2% of the total investment.

Many products such as these have been sold to conservative investors who were not willing to lose money - based largely on the historically positive performance of Apple stock. Investors often do not understand the complexities of these products, or others like them. In many cases, investors seeking safe income may not have been aware of this risk or had it downplayed to them, which could constitute a sales practice violation committed by their broker.

Unfortunately, as Mr. Zweig notes at the end of his article "Complexity always favors the seller, not the buyer. And the house always wins."

However, this does not have to be true. Investors have the ability to fight back against "the house."

Falling Timber: Timberland REIT Reportedly Plunges In Value

Wed, 19 Dec 2012 17:01:52 -0500

As recently reported by InvestmentNews, the estimated value of common stock in real estate investment trust (or REIT) of Wells Timberland REIT, Inc. fell to $6.56 per share. Given the illiquidity of the trust, finding that price in the market may prove difficult. That figure marks a 35% plunge in value since the REIT premiered in 2006 at $10 per share. Unfortunately, such incidents are all too common in a post-bubble real estate industry continuing to face adversity. Many of these incidents have caused substantial losses to investors who invested some or all of their savings in these ventures at the recommendation of their financial advisor.

The trust in question is controlled by Wells Real Estate Funds, an industry giant which has over $11 billion invested in real estate worldwide. Wells management has committed $37 million in preferred equity to this REIT alone, yet the trust currently appears to accrue annual dividends of a mere 1%. In October of 2011, redemption of trust shares was suspended until a new share value could be determined. Beginning next month, shareholders are apparently supposed to have the option of redemption, which will garner 95% of each share's estimated value, or $6.23.

REITs in many instances can be considered to be high-risk endeavors: appealing for their potential for high gains due to their interest rates, but with equal if not unwarranted potential for resolute failure, and a possible lack of accountability toward investors. Too often, financials advisors describe high-risk investment products like REITs as safe, secured or guaranteed, typically to get the higher commission that these riskier investments pay. Misrepresenting the risk of an investment to a customer like that is against the law and rules under which these professionals work.

It is the right of any and all investors who believe they may have suffered losses as a result of recommendations of their financial advisor to contact our offices to explore their legal rights and options. If you or a family member invested in real estate investment trusts, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

Malecki Law takes a proactive and informed approach to the financial news of today: actively engaging in fact-finding analysis on prospective cases from around the world. Our thorough knowledge of securities law's history and fine points makes us ideal consultants for investors who have suffered losses due to misadvice from their broker or other financial counsel. Information on a selection of funds and companies currently under investigation by Malecki Law can be found below. Our pursuit of excellence is constant, but our opportunities to make lasting positive change to the securities industry begin and end with determined clients who seek justice.