New York Securities Lawyers Blog

In a follow up to Malecki Law's recent announcement of our investigation into reverse convertible securities comes news that the Financial Industry Regulatory Authority (FINRA) has fined Wells Fargo Investments, LLC $2 million for the selling of unsuitable reverse convertibles securities, as well as failing to grant sales charge discounts to certain customers on Unit Investment Trust (UIT) transactions. A UIT can be defined as ownership of a fixed portfolio of securities within a finite timespan. FINRA's press release regarding the matter defines reverse convertibles as "interest-bearing notes in which repayment of principal is tied to the performance of an underlying asset, such as a stock or basket of stocks." Customers of such reverse convertibles risk sustaining losses if the value of the underlying asset falls to a certain level at certain points of maturity during the contracted term.

A separate complaint was filed by FINRA against Alfred Chi Chen, the former Wells Fargo registered representative who approved and sold the reverse convertibles. Chen recommended hundreds of unsuitable investments to twenty-one clients, most of whom were elderly investment novices with low capacities for risk. Fifteen of those twenty-one clients were over the age of eighty. Chen also made unauthorized trades in several accounts, including those of deceased customers.

FINRA specified that Wells Fargo failed between January 2006 and July 2008 to give qualified customers breakpoint and rollover/exchange discounts to which they were entitled upon purchasing UITs. This has been attributed to insufficient internal monitoring of sales and discount eligibility.

Wells Fargo has neither admitted nor denied any wrongdoing within these charges, but consented to FINRA's findings and will thus pay the fine in due course.

Investors with questions concerning potentially unsuitable or risky investments made by registered representatives should contact the attorneys at Malecki Law for a confidential consultation.

FINRA's December 15, 2011 News Release can be found here.

It has been difficult to not hear about the recent events surrounding MF Global Holdings Ltd and former Senator and New Jersey Governor, John Corzine. However, many investors do not really understand what happened or why. A recent article in Forbes Online titled "MF Global: Were the Risks Clear?" helps to break down just how these events transpired. The article details how overexposure to European sovereign debt (government bonds) leveraged by using borrowed money (called "margin") coupled with declines in the value of those bonds caused the downfall of the fund.

The almost overnight collapse of such a prominent and public investment fund as MF Global has brought many issues to light, and the Forbes article characterizes this "as the latest reminder to investors that it's important - and sometimes very difficult - to understand the entire spectrum of risk they're exposed to." These events also raise many questions that should be asked by investors, such as "Do I really understand how my advisor is managing my savings?" and "Have the risks in my portfolio been adequately explained to me?".

Many investors in MF Global have said that they did not understand what their money was being invested into, but rather trusted that the firm would do the right thing by them. One investor cited by the article said on his blog that "I am supposed to know the difference between an ethical operator and one that is not. The truth is that it often is very difficult to tell them apart." This has unfortunately come to be a fairly common sentiment by many individual investors, in reference to their personal broker and the funds they invested in.

In the present day, individual investors as well as large institutions and investment funds can all be equally at risk of the volatility in the European markets, like MF Global was. Investments directly in European bonds and others with exposure to the European markets may not be appropriate for conservative investors, including senior citizens and retirees, especially if these investments were made on margin. Individuals with these investments may have already lost or may be at risk of losing large portions or possibly all of their investments.

It is the right of any and all investors who believe they may have suffered losses to contact our offices to explore their legal rights and options. If you or a family member suffered losses in unsuitable or risky investments, such as those in European debt, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation.

Malecki Law announces the filing of a civil arbitration complaint in excess of $4 million, plus punitive damages, against MetLife Securities, Inc. The case is being filed with the Financial Industry Regulatory Authority ("FINRA") today for alleged improper supervision and selling away, relating to an alleged Ponzi scheme that devastated a Bronx community. The complaint alleges that the firm failed to properly supervise and maintain the compliance of one of their registered representatives, Mr. Robert H. Van Zandt, in violation of federal and state securities laws, as well as financial industry rules and regulations. Robert H. Van Zandt is apparently already under investigation by the New York State Attorney General's Office. "I believe there are a lot of victims out there who don't know what is going on, nor their rights under the rules and regulations of the securities industry," securities fraud attorney Jenice Malecki indicates.

In November of this year FINRA and the U.S. Securities and Exchange Commission jointly released Regulatory Notice 11-54 stressing the importance of supervision over registered representatives. Shortly before the release of Regulatory Notice 11-54, FINRA filed a regulatory action against Merrill Lynch and fined the firm $1 million for failing to properly supervise a registered representative and catch a Ponzi scheme that he was running out of a San Antonio, Texas branch office that victimized clients and non-clients of Merrill Lynch, all to which Merrill Lynch was responsible for its failure to supervise.

The complaint filed by Malecki Law relates to the alleged conduct of Robert H. Van Zandt of the Van Zandt Agency, who is believed to have sold unregistered securities in the form of promissory notes that were represented to prospective investors as part of a secured real estate investment, which appears improperly set up and not secured at all. It is alleged that these notes were part of yet another "Ponzi" scheme in what Ms. Malecki opines to be "an era filled with ponzi schemes for which the industry should closely monitor to avoid harm to unwitting victims," this alleged ponzi scheme one run through a series of shell companies including Burke and Grace Avenue Corp.

According to his FINRA Broker Check Report, Robert H. Van Zandt was a registered representative with MetLife Securities, Inc. from December of 2004 through February of 2007. During that time, it is alleged that despite its duties to properly supervise Mr. Van Zandt, MetLife Securities allowed him and others to sell unregistered securities in connection with the operation of this Ponzi scheme for the entirety of his tenure with the firm.

It is alleged that Mr. Van Zandt used his status in the close-knit Bronx community to earn the trust of his clients, and ultimately, solicited hundreds of investors, defrauding them of over $20 million. According to the complaint filed with FINRA, Investors were solicited to invest in the scheme while they were having their tax returns done at the Van Zandt Agency and were lured into verbally and through prominently placed brochures promising essentially "guaranteed" returns of 9-12% annually, without appropriate registration, disclaimers, or any earmarks of supervision over this conduct. It is believed that these investors, many of whom invested their IRA's, proceeds from inheritances, and life savings, have lost substantially all, if not all, of their investment.

Investors or employees with knowledge of the events at the Van Zandt Agency who seek further information or want to explore their rights should contact Malecki Law by e-mail or phone. Malecki Law has a uniquely diverse background with significant experience representing clients in securities and investment fraud issues and is "AV Rated" by Martindale-Hubbell. Malecki Law hosts a website providing information and resources dedicated to the securities industry: www.AboutSecuritiesLaw.com. Please contact Jenice L. Malecki, Esq., MALECKI LAW, 11 Broadway, Suite 715, New York, NY 10004, Telephone: (212) 943-1233, Facsimile: (212) 943-1238, E-Mail: Jenice@MaleckiLaw.com.