It is no secret on Wall Street today of what is happening in Puerto Rico in connection with the devastation of the UBS Puerto Rican Closed End Bond Funds.  For many on the island and others in the 50 states, it is a whopper of a problem.

Any time there is a complete catastrophe with a product, such as there is in Puerto Rico, two sets of victims emerge.

The first is the investors who were likely misled and as a result have lost significant portions of their life savings.

Another, often overlooked, set of victims is the brokers/financial advisors who sold the product.  Frequently, brokers in situations like this are not given complete information and are misled themselves.  Firms may even have high pressure sales meetings, threatening brokers that they will lose their jobs, or their bonuses or their book of business if they do not sell the firm’s toxic product.

After the product “blows up” those brokers then can find themselves looking for answers from their firm as to why they were treated this way.  As these brokers find themselves subject of multiple lawsuits and customer complaints, the prospects of finding a job elsewhere in the securities industry disappear.  This can leave someone in that position completely devastated, with few options to provide for themselves and for their families.

The firm is frequently the party responsible in such situations, including those in upper management, who failed to properly inform the brokers on features and risks of the product, or worse, misled them completely.  The head of UBS Puerto Rico, Miguel Ferrer has come under scrutiny by the SEC.  In In the Matter of Ferrer, a case held before ALJ Brenda P. Murray, Miguel Ferrer, who at the time worked for UBS as a Chairman, Chief Executive and Vice-Chairman, was accused of acting with scienter, negligently making misrepresentations, or omitting material information in emails and memos sent to brokers regarding UBS’s Puerto Rican Bond Funds.

Brokers who are victims in product cases are not without hope.  Brokers who have been misled and mistreated by their firm in the case of a toxic product may be able to sue the firm in FINRA Arbitration. In arbitration, brokers may be able to have their CRD records expunged, and recover for lost earnings as a result of losing their job and their book of business.

Malecki Law is experienced in representing registered brokers and financial advisors in expungement proceedings and in arbitrations for lost wages and compensation against the current or former firm.

Various news sources, including the New York Post, the Wall Street Journal and CNBC reported on January 22, 2015 that Owen Li, the manager of Canarsie Capital, published a letter to investors apologizing for the almost complete loss of money, stating he was “truly sorry.”

According to the Wall Street Journal, Canarsie, which was started at the beginning of 2013 and named for the Brooklyn neighborhood where Mr. Li grew up, had approximately $60 million at the beginning of this year, not including leverage.  With borrowed money, the fund had approximately $98 million at the beginning of 2014, according to the Wall Street Journal.

According to the CNBC article, Mr. Li previously worked as a trader for Galleon Group, which collapsed amid allegations of insider trading, and the 2011 conviction and imprisonment of Raj Rajaratnam, Galleon’s founder.

The Wall Street Journal’s article detailed that in March 2014, its prime broker, Morgan Stanley, stated it was uncomfortable with the firm’s risk practices, and a month later told Canarsie to find a new clearing firm concerning the continuing risk profile.

While hedge funds may experience large swings in profit or losses, it is essential that the marketing and subscription documents investors are shown accurately reflect the risks that will be applied to the invested funds.  In certain circumstances, investments may be misrepresented when marketers describe the investment as not being as risky as it truly is.

If you believe you may have suffered monetary losses as a result of investments that were not properly marketed or held outsized undisclosed risk, please contact the attorneys at Malecki Law to determine if you have a claim for damages.

A memo drafted by Jason Furman, one of President Obama’s top economic advisors, entitled “Draft Conflict of Interest Rule for Retirement Savings” was reportedly obtained by Bloomberg News.

The memo cites research that says investors may lose between $8 billion and $17 billion per year as a result of stockbroker/financial advisor practices, such as excessive trading commissions.  That number, while astonishing, may even be an underestimate according to some people.

As a result, some on Capitol Hill are calling for stricter rules on Wall Street.

One thing being looked at is the imposition of a “fiduciary standard” on brokers when handling retirement accounts.  This would require brokers to act in their clients’ best interests.  Many are surprised to hear that brokers may not always be required to act in a fiduciary manner.  Yet the fact is that based upon the specific circumstances, some brokers may only be held to a lesser “suitability” standard.

Unfortunately, many brokers cave to the temptation presented by conflicts of interest, such as increased commissions for selling one mutual fund over another.  This leads to brokers looking out for themselves, at the expense of their customers.  The memo indicates that some investors lose up to 10% of their long term savings because of such conflicted advice.

Given reports that tens of millions of people have savings in retirement accounts that total more than $11 trillion in total assets, it is no surprise that a push to a fiduciary standard for these accounts is gaining steam.  Given their age and varying levels of diminished capacity, senior citizens tend to be especially vulnerable to the illicit sales practices of an unscrupulous broker.  This makes protecting senior investors a paramount concern.

The attorneys at Malecki Law have significant experience representing victims of investment fraud and negligent financial advisors in arbitration and have successfully recovered millions of dollars on the behalf of individual investors, as well as large groups of investors, who lost money due to inappropriate investment advice.

If you or a family member suffered losses because of inappropriate investment advice, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

Investors in Diversified Lending Group Inc., allegedly solicited by Tony Russon and other agents who worked under him at Russon Financial Services, may be able to sue Metropolitan Life Insurance Company in FINRA Arbitration after their California class action failed to obtain certification.  In Los Angeles this past week, a California Superior Court judge in Cantor et al. v. MetLife Inc. et al. rejected the class certification bid from 212 investors whose claims were based on being the victims of an alleged Ponzi scheme said to involve fraudulent investments sold by agents of MetLife and subsidiary New England Life Insurance Co.

It has been alleged that MetLife and New England Life failed to properly supervise Mr. Russon and others while they were unlawfully convincing investors to place large sums of money with Diversified Lending Group Inc.  According to reports, DLG was run by alleged Ponzi schemer, Bruce Friedman.  Investors reportedly lost millions to the scheme, devastating themselves and their families.

However, all may not be lost for investors after the class failed certification.  Investors may be able to pursue their claims in FINRA arbitration.  Arbitration works similarly to court proceedings in many ways, and it is a forum in which victimized investors regularly recover losses resulting from Ponzi schemes and other fraudulent investments.

The attorneys at Malecki Law have significant experience representing Ponzi scheme victims in arbitration.  The attorneys at Malecki Law have successfully litigated multiple claims on behalf of individual investors, as well as large groups of investors, who lost millions of dollars in Ponzi and Ponzi-style schemes.

It is the right of any and all investors who believe they may have been the victim of a Ponzi scheme to contact our offices to explore their legal rights and options. If you or a family member invested in DLG, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

 

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The financial industry is one built on commissions on the sales side and bonuses in the back office.  While sales staff can often readily determine where they fall on the commission scale to determine their net payout, non-sales personnel do not typically have that luxury.  Non-sales employees such as product engineers, traders and the like frequently receive performance bonuses that are not tied to any predetermined scale or schedule.   Just this past week Citigroup and Bank of America reportedly shrunk their bonus pool for certain investment banking, trading and other securities related employees.

Such performance bonuses are usually understood that they are not above and beyond, but rather a necessary part of the employee’s annual compensation.  Given that many bonuses may be multiples of an employee’s relatively small annual salary, not receiving a year-end bonus can be devastating for someone who was counting on it.  Those who get “stiffed” out of their bonus may find themselves facing the year ahead with uncertainty.  Worries like “How am I going to pay my mortgage? Or my child’s tuition?” can quickly become an unfortunate reality.

The first step someone in this position usually takes is speaking with their supervisor or a representative in their company’s HR department.  If you have already done this, you were likely told that your bonus was “discretionary” and the firm did not owe you a penny.

In many cases, this is only partially true.  While many employment agreements may include a provision that says bonuses are “discretionary,” the law still protects the rights of those who have provided a service but have not been fairly compensated.

Therefore, an individual may be entitled to sue and recover some or all of what they should have received in their bonus, even if the firm used its “discretionary” authority to not bonus the employee.   Depending on the individual’s specific circumstances, they may be able to recover under the common law theories of breach of express and/or implied contract, quantum meruit, restitution, and unjust enrichment.  State employment laws also offer protections to employees, which can vary from state to state, but may provide an avenue to recover some or all of the withheld bonus.

The attorneys at Malecki Law have experience representing employees in the financial industry in cases resulting from the withholding of an employee’s bonus.  If you or a family member had their bonus improperly withheld, contact the securities lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

 

The North American Securities Administrators Association (NASAA), an organization comprised of State securities regulators, recently issued an Investor Alert regarding self-directed IRAs and the third-party custodians who service those accounts.  In fact, the term “custodian” may be a misnomer, because generally the third-party custodian does not custody any property, and only reports information to the IRS, or from an issuer to an investor.

According to the Securities and Exchange Commission’s Self-Directed IRAs Investor Alert, close to $100 billion was held in self-directed IRAs, making them possible targets for fraud.  According to the SEC, self-directed IRAs are tax-deferred Individual Retirement Accounts that carry a financial penalty for premature withdrawals before the requisite age.

Investors certainly need to be wary of self-directed IRAs holding investments recommended by their financial advisor or registered representative.  Increasingly, the attorneys at Malecki Law are seeing self-directed IRAs used as a means to fraudulently take money from investors.  While they can be used for legitimate purposes, Malecki Law has seen self-directed IRAs used to funnel money out of legitimate investments into other investments that may be fraudulent.

Investors often believe that because they receive a monthly summary or statement of their investments from a third-party custodian, their investments are “safe” or that the third-party custodian owes them a high duty as a fiduciary.  In fact, the opposite may be true: the custodian is not a fiduciary and may not even hold the assets.

As outlined by NASAA in its Investor Alert, third-party custodians:

  • Do not research or perform any due diligence regarding recommendations made to investors by brokers or issuers;
  • Are passive companies that merely serve as an intermediary between the investor and the issuer of an investment;
  • The third-party custodian’s only obligation is to report information to the IRS and from the issuer to the investor; and
  • The third-party custodian bills the investor for its record keeping services, but does not hold the investments.

William Beatty, the NASAA President and Washington securities director, was reported by Thinkadvisor.com as saying “Fraud promoters can misrepresent the responsibilities of self-directed IRA custodians to deceive investors into believing that their investments are legitimate or protected against losses.”

Unfortunately, public investors can lose money as a result of recommendations to make investments through self-directed IRAs.  As noted by NASAA and the SEC, there is an increased risk in fraudulent conduct through these accounts, and third-party custodians are under no obligation to perform due diligence to ensure investments made through self-directed IRAs are legitimate.  If you believe you may have suffered monetary losses as a result of investments held in a self-directed IRA, please contact the attorneys at Malecki Law to determine if you have a claim for damages.

As oil prices have continued to plummet and commuters across the country have regaled the resulting savings at the pump, investors in oil and gas related stocks, ETFs and master limited partnerships have been shocked by the crushing losses on their brokerage account statements.

With interest rates near all-time lows, some financial advisors with clients seeking income have strayed from the usual safe, reliable treasury bills, high-grade municipal bonds, and the like, instead recommending riskier investments in search of higher yield and more income.  If such investment advisors recommended securities tied to the oil and gas sector, the last few months may have proven disastrous for their clients.

For example, financial advisors have been known to recommend “Master Limited Partnerships” (MLPs), which offer an investor the opportunity by into an oil/natural gas discovery, production and distribution enterprise.  While MLPs offer typically higher rates of income than more traditional investments, investors are frequently not advised by their financial advisor of the significantly higher risks.  Unfortunately, investors who were sold MLPs as safe, income producing investments, may only be learning of these previously hidden risks now that their investment has dropped significantly in value.

MLPs are not the only way to invest in oil and natural gas.  Another way to invest in oil and gas in through “Exchange Traded Funds” (ETFs).  ETFs are typically sold as an alternative to mutual funds that trades like a stock.

Unfortunately, that is not the whole picture.  ETFs can be riskier than traditional mutual funds, and have some features that make them different from stocks.

One classic example is leverage, meaning that the product is structured in a way to amplify gains (and losses).  (You can read more about leveraged ETFs here.)  While more gains may sound good, there is more risk of more losses, which is bad.  For many investors leveraged ETFs are not appropriate.

Investors who have had their portfolio concentrated in leveraged (or even ordinary, non-leveraged) ETFs in the oil and gas sector have probably seen the value of their portfolio drop catastrophically.

For example, the following oil, gas, and energy related ETFs have lost between 30% and 85% of their total value in the last 3 months alone:

  • Direxion Daily Nat Gas Rltd Bull 3X ETF (GASL)
  • VelocityShares 3x Long Crude Oil ETN (UWTI)
  • ProShares Ultra Bloomberg Crude Oil (UCO)
  • Direxion Daily Energy Bull 3X ETF (ERX)
  • First Trust ISE-Revere Natural Gas ETF (FCG)
  • PowerShares S&P SmallCap Energy ETF (PSCE)
  • ProShares Ultra Oil & Gas (DIG)
  • SPDR® S&P Oil & Gas Equipment&Svcs ETF (XES)
  • PowerShares Dynamic Oil & Gas Svcs ETF (PXJ)
  • United States Brent Oil ETF (BNO)
  • Market Vectors® Oil Services ETF (OIH)
  • Market Vectors® Unconvnt Oil & Gas ETF (FRAK)
  • iPath® S&P GSCI® Crude Oil TR ETN (OIL)

To the average investor, losing that much value in such a short amount of time can be shocking and devastating.  When such losses were the result of fraudulent recommendations by a financial advisor, they may be illegal.

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 lost money in exchange traded funds, MLPs or any other oil, natural gas and energy related security, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

The Financial Industry Regulatory Authority (FINRA) has announced that Merrill Lynch has been fined $1.9 million and ordered to pay restitution in the amount of $540,000 for fair pricing violations as well as supervisory violations related to the purchase of certain distressed securities.

According to FINRA, more than 700 transactions in Motors Liquidation Company (MLC) Senior Notes with retail customers were affected over a two year period.   FINRA found that “Merrill Lynch purchased MLC Notes at prices that were not fair to its retail customers.”   Specifically, Merrill Lynch was found to have purchased the notes from retail customers for anywhere between 5.3% and 61.5% below market price, leaving customers significantly disadvantaged.  Merrill Lynch would later selling those shared purchased from retail customers to other broker-dealers at the prevailing market price.

Another problem FINRA found was that Merrill Lynch failed to have an adequate supervisory system in place to detect whether the prices paid to retail customers on the MLC Notes were fair and consistent with prevailing market prices.

Proper supervision is critical in the brokerage industry for the protection of investors.  Unfortunately many financial firms have significant lapses in their supervision over their personnel.  When that happens, customers can incur substantial losses unnecessarily.

Customers who lose money as a result of supervisory failings on the part of their broker-dealer may be entitled to recover those losses.

If you or a family member may have lost money and you believe the account was not properly supervised, 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.

Citigroup, Inc. has reportedly agreed to pay a $3 million fine for failing to properly deliver prospectuses to some customers.  Specifically, according to the Financial Industry Regulatory Authority (FINRA), Citigroup failed to deliver prospectuses to customers who bought shares in one or more of 160 exchange traded funds (ETFs) in late 2010.  It has also been said that Citi may have not delivered prospectuses related to more than 1.5 million ETF purchases between 2009 and early 2011.  Citigroup was also fined by the New York Stock Exchange in 2007 for similar issues.  FINRA, according to reports, said Citigroup failed to have proper procedures in place to supervise the process.

This is the second such snafu by a major American bank resulting in a fine this year.  Just this past September, Morgan Stanley said that it would pay for the losses incurred by customers who purchased certain mutual funds, after the bank admitted that it failed to make prospectuses for those funds available on its website.  In total, this is believed to have cost Morgan Stanley roughly $50 million.

Financial firms have significant duties to their customers – risk disclosure being one of the most important.  Transparency, including risk disclosure, is critical to the efficient functioning of the markets.  So, when major financial firms fail to fulfill their duties, meaningful fines should be imposed.  Whether or not the fines in these instances are meaningful remains up for debate.

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Malecki Law is investigating possible unsuitability claims against stock brokers and financial advisors who sold shares of Amarin to investors for whom the stock was not appropriate.

Amarin is a biopharmaceutical company based out of New Jersey.  The company’s primary business involves the development and marketing of medicines used to treat cardiovascular disease.  Amarin is best known as the company that developed the pharmaceutical drug Vascepa.

Over the past few years, Amarin has been reportedly seeking various FDA approvals for Vascepa.  During the past four to five years, the shares of Amarin have shown great volatility.  The shares have gone from roughly $1 per share in February of 2010 up to $19 per share in May of 2011 and back down to just more than $1 per share today.  In October 2013, share prices went from more than $7 per share to just over $2 per share in less than two weeks.  Again this past October, share prices dropped roughly 50% in only one month’s time.

As a result, investors who were sold Amarin by their financial advisor may have experienced crushing losses.  It is believed that some financial advisors may have been advising clients to buy Amarin in the run up to major announcements by the company.  When negative news came out, the stock price fell dramatically, causing significant losses to investors.

Financial Industry Regulatory Authority (“FINRA”) rules expressly prohibit registered financial advisors from selling unsuitable investments to the public. Therefore, investors who bought Amarin at the recommendation of a financial advisor may be able to recover some or all of their losses.

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 Amarin, 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.