New York Securities Lawyers Blog

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 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 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.

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.

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.

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 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.

Headline news charting the dramatic peaks and valleys of select Credit Suisse and Barclays properties prompted the Financial Industry Regulatory Authority Inc. (FINRA) to issue a July warning to investors detailing the potential risks inherent to exchange-traded notes (or ETNs). The investor alert, entitled "Exchange Traded Notes - Avoid Unpleasant Surprises", details vital notices to consumers on the nature of such properties.

"ETNs are complex products and can carry a raft of risks," said Gerri Walsh, FINRA's Vice President of Investor Education in a July 15th statement to Investment News. "Investors considering ETNs should only invest if they are confident the ETN can help them meet their investment objectives, and they fully understand and are comfortable with the risks." Unfortunately, all too often these risks can be hidden from investors by their financial advisor.

Many investors may believe that ETNs are just like exchange-traded funds (or ETFs). However, despite their similar naming and being commonly categorized together, ETNs are quite different than ETFs. ETFs can be essentially characterized as a grouping of bonds or stocks that trade within the same day on an exchange. ETNs meanwhile, do not in fact hold anything, but rather are bank-drafted promissory notes intended to deliver the returns of an index. Unlike an ETF, an ETN in many respects is an uncollateralized loan to a bank, albeit one that offers theoretically great rewards to an index's return. The value of an ETN is largely dependent on the given day's market value of the index it tracks.

The risk within ETNs comes when that bank is no longer able to issue new shares. This moment can arise either when the bank can no longer practically hedge against the index, or when the peak number of shares has been reached. When the peak has been reached and there are no new shares to offer, continued demand for them can force shares to a premium over the total asset value. In addition, there is also the potential that the issuer can default on the note, or otherwise prove a detriment to its value.

In addition, ETNs are not under the confines of the Investment Company Act of 1940, which requires funds to have a board of directors and issue standard disclosures. For banks and other issuers, an ETN is a win-win situation: inexpensive to run and inclined to shift risk to the consumer. Yet many investors may be left bearing heavy losses when the ETN market goes against them.

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 suffered losses through an investment in exchange traded notes, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

After years of concerns raised but never fully investigated by futures industry regulation, the Commodity Futures Trading Commission (CFTC) and National Futures Association (NFA) took enforcement action July 9th against brokerage firm Peregrine Financial Group, also known as PFGBest. Peregrine founder Russell Wasendorf subsequently confessed to committing acts of embezzlement and fraud over the course of two decades, illegally acquiring over $100 million. Wasendorf was then arrested on charges of having lied to government regulators.

$215 million is believed to be missing from Peregrine's pool of customer funds, with a recently forged bank statement claiming $221 million in company accounts with U.S. Bank, while the bank has Peregrine on file for only $6.3 million. Four regulatory actions have been against Peregrine since 1996 - with allegations including inaccurate accounting, insufficient capital, and problems with segregating customer money.
Wasendorf in writing confessed to having spent most of the funds embezzled over the course of his career, using the money to secure firm capital, purchase PFG's corporate headquarters, and even pay regulatory fines and fees. In July, a half dozen customer claims on PFG were met with quotes of twenty-two to twenty-five cents on the dollar by CRT Capital Group, a limited liability company which deals in distressed debt.

Such offers are particularly distressing compared even to newly bankrupt commodities firm MF Global, whose claims remained at upwards of 75 cents on the dollar. The slim return on PFG claims is said to stem from uncertainty that the missing $215 million - which accounts for roughly half of Peregrine's customer funds - will be recovered any time soon, if it is recoverable at all. Texas based hedge fund Fulcrum Capital has cited a face value on most PFG claims of less than $200,000.

Since 1995, Peregrine is reported to have been on the defensive in sixty-nine total arbitration disputes with the CFTC and NFA, waged by former customers allegedly seeking to recoup invested funds. Over half of those cases have come in the last year. While the CFTC argues that it is the NFA's duty to monitor small firms like Peregrine, NFA officials are said to have privately told the Wall Street Journal that they didn't consider the enforcement actions or arbitrations faced by the firm to be cause for alarm in comparison to the number of actions brought against comparable futures dealers.

The NFA was notified last year by a national bank of a $200 million shortfall in Peregrine's accounting. Peregrine then faxed information which is said to have suggested that no funds were in fact missing. This dissonance is alleged to have not been investigated further by the NFA. It is now supposedly presumed that the faxes sent to the NFA were meticulously falsified bank statements forged directly by Mr. Wasendorf.

Wasendorf became savvy in deceiving regulators, creating false documents using scanners and common computer programs like Adobe Photoshop and Microsoft Excel. He additionally confessed to developing techniques to create doctored online bank statements, using a false post office box to intercept NFA requests, and insisting that all U.S. Bank statements for Peregrine come directly to him, so as to have ample time to forge new documentation.

It was during a routine NFA audit shortly thereafter that Wasendorf's false statements were faxed. Additional cause for concern has come from the revelation that the NFA was previously unaware that Peregrine was being audited by Veraja-Snelling & Co., a one-person firm in Glendale Heights, Illnois.

How Peregrine rose to impressive heights in the futures industry despite a long record of questionable policies and losing customer money is now a case of matching suspicion with public record. Created in 1992 and expanding tenfold two years later after absorbing a rival firm that had gone under, Peregrine is said to have targeted troubled investors with little knowledge and lots of cash.

In 1995, the NFA cited two dates in which the firm failed to have adequately segregated customer funds from their own. A 1996 enforcement action brought by the NFA allegedly cited Peregrine promotional material as misleading and problematic, namely in radio commercials which are said to have professed that customers could "turn $10,000 into $80,000", among other comparable claims. Peregrine paid a $75,000 fine, but supposedly continued running such ads for up to six months after the fine was delivered. The CFTC fined Peregrine a total of $90,000 in 2000 for supposed reporting failures and misstatements. Yet Peregrine managed to win most of its arbitration cases brought by customers, who typically cited unqualified brokers and failure to disclose risk as chief complaints.

Futures industry reform advocates have alleged that Peregrine's downfall identifies a need for more auditors of the futures industry, as well as more informed training for those who do audit, so that they might recognize these warning signs and act upon them with less reticence. How the CFTC and NFA will respond in turn remains to be seen.

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 suffered losses, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

Professor of economics Peter J. Henning wrote July 30th for the New York Times of the ever-changing definition of what classifies as "insider trading" in today's market. Henning's approach is at once streamlined and nuanced, walking us through a user-friendly tutorial of how and why fiduciary duties are upheld. Because insider trading holds no set definition within federal law, proving it within legal confines can be a hazy process. Henning illustrates this flexibility by profiling two recent cases filed by the U.S. Securities and Exchange Commission ("SEC"). For a detailed definition of fiduciary duty and its effects on one's securities, visit the Investors page of our firm's website.

Likely the most common claim cited within insider trading cases is violation of the SEC's "Rule 10b-5" - subtitled "Employment of Manipulative and Deceptive Devices" - which bans "any device, scheme, or artifice [used] to defraud" investors. Simply put, insider trading violates an investor's rights when a financial representative takes confidential information and uses it for their own gains. Rule 10b-5 was created in 1942, after the SEC allegedly got word of a company's president who lied to shareholders, claiming the company was doing poorly and then buying investors' shares, when in fact their stock was booming. Henning writes that incredibly, until the inception of Rule 10b-5, such fraud was not explicitly prohibited.

Often insider trading violations amount to "jumping the gun" with regard to the exchange of information leading directly to trades of stock or other securities. Earlier this year, trader Larry Schvacho allegedly made over $500,000 from stock in Atlanta tech firm Comsys IT Partners. Last week the SEC set out to prove through civil action that Schvacho had been given non-public information as to the stock's value by Larry Enterline, a close friend of Schvacho's and chief executive at Comsys. Proving insider trading in this instance would likely require not only proof of possession of non-public information, but a determination that Schvacho breached the trust of his longtime confidante.

The Supreme Court has presented legal parameters for fiduciary duty and the ways in which insider trading violates such an agreement. In Chiarella v. United States, the court determined that insider trading "is premised upon a duty to disclose arising from a relationship of trust and confidence between parties to a transaction." Typically this information comes to those who hold a job within the financial entity in question, or as some kind of consultant outside of the company.

That Schvacho is said to be a mere friend of Enterline's with no occupational ties to Comsys makes proving claims of insider trading that much more challenging. In the case of United States v. Chestman, a U.S. Court of Appeals rejected a comparable scenario in which a husband capitalized on knowledge of an upcoming deal accrued from his wife. In the case of Schvacho and Enterline, the SEC aims to set a precedent toward expanding the parameters of fiduciary duty to interpersonal relationships.

The SEC's case is helped by Schvacho allegedly having violated another of its commands, Rule 14e-3, which prohibits insider trading on information about a tender offer. Rule 14e-3 does not require proven breach of fiduciary duty, merely knowledge that the information capitalized upon was considered confidential.
It has been suggested that the SEC seeks to also prove that insider trading can stem not only from unfairly utilizing knowledge, but also from a failure to disclose vital information to one's investors. Earlier this year, the Commission sued Manouchehr Moshayedi, chairman of STEC, for supposedly selling over $133 million in company shares due to disconcerting knowledge about the company that was not publicly shared.

The SEC claims that in secretive dealings with STEC's peers, Moshayedi requested that companies buying STEC products procure more of such products than they actually needed, so that STEC could continue to tout increased sales, thereby raising the value of its stock. But once STEC's under-the-table negotiations were publicly revealed, STEC shares are alleged to have plummeted by over 30 percent.

Henning believes that the case against Moshayedi is not so much an instance of insider trading, but rather "a typical fraudulent disclosure case in which the party on the other side is misled about the value of the securities... a classic omission case in which a seller is accused of misleading a buyer." Henning goes on to suggest that Moshayedi's requirement to disclose information about STEC's sales is a separate concern from his having inappropriately used concealed corporate information for his own gain.

Having not reached settlements in either of the cases against Schvacho and Moshayedi, the possibility of courts redefining or broadening current definitions of insider training remain a possibility. And while the legal boundaries of what constitutes fraud and insider trading remain debated, the need for investors to inform themselves in the face of lacking transparency remains.

Recent front page woes of JPMorgan Chase and MFGlobal - as well as Barclays manipulation of Libor interest rates - have spurred debate as to whether our regulatory bodies are failing to meet watchdog standards of prosecuting financial crimes on Wall Street, and to what degree offending banks and brokers alone should be held accountable for their illegal activities. When Timothy Geithner, the current Treasury secretary and ex-president of the Federal Reserve Bank of New York (herein referred to as "the Fed") testified before the House Financial Services Committee last Wednesday, the discourse centered around concerns of cronyism between regulators and those they supervise, as well as a lack of legislative power for regulators to prosecute financial crime. For a thorough listing of New York regulators and industry associations available to consumers, visit the Resources page of our firm's website.

The Fed, located in Lower Manhattan, places examiners inside the office's of the nation's largest banks. The office believes that those examiners sent into the field are said to be among the most "battle tested" and willing to challenge Wall Street wrongdoers on their violations. Yet the Fed itself does not enforce financial law, leaving punishments and fines to the Federal Reserve and other agencies such as the CFTC and SEC. "They focus on the safety and soundness of the banks, which ultimately means they are not particularly focused on market manipulation," said Sheila C. Bair, the former chairwoman of the Federal Deposit Insurance Corporation, a fellow regulation branch.

The Fed is at once hindered by its lack of jurisdiction, while also being criticized for being considered by many to be excessively corroborative with the banks they are to supervise. Particularly noteworthy is the revelation that the Fed has allegedly known Barclays had been reporting false rates since 2008, yet did not stop (or in their view, were not authorized to stop) these actions. Given that the Fed cannot levy fines, it instead typically requests policy changes from a bank, alerting authorities at the Federal Reserve board only when the bank fails to comply for a sustained time period. It is then up to Federal Reserve to take disciplinary action.

Mr. Geithner purports to have urged British authorities via a June 2008 e-mail to "eliminate incentive to misreport" Libor rates, but argues it was out of his jurisdiction to take further action. Yet he also is said to have failed to notify the Federal Reserve to these misreportings. In April 2008, the New York Fed learned from Barclays that it was artificially depressing its Libor reports to deflect concerns about its health. "We know that we're not posting um, an honest" rate, a Barclays employee allegedly told a New York Fed official. Fed regulators are now focusing on how the Libor investigation may require America's largest banks to conserve reserves of cash to fight potential lawsuits.
"We gave them very specific detailed changes," said Geithner, who argued that responsibility finally lies with the British regulators. "This is a rate set in London."
On the same date of that conversation, New York Fed officials purportedly wrote in a weekly internal memo that underreporting concerns were rampant. "Our contacts at Libor contributing banks have indicated a tendency to underreport actual borrowing costs," New York Fed officials wrote, "to limit the potential for speculation about the institutions' liquidity problems."

It has also been suggested by critics of the Fed that it is populated by too many former Wall Street executives. Fed president William C. Dudley was formerly the chief domestic economist at Goldman Sacha. Dudley's wife Ann E. Darby collects deferred compensation from her days at JPMorgan. After Bear Stearns collapsed in 2008, the New York Fed hired the firm's chief risk officer.

"The regulator has an obligation to make a criminal referral if it suspects a crime may have occurred," said Bart Dzivi, who served as special counsel to the Federal Financial Crisis Inquiry Commission. "How this doesn't rise to that level, simply boggles the mind."

For new and experienced investors alike, having the best possible intelligence and data motivating one's investments is the difference between either making smart investments, or being led astray by those brokers who aim to deceive. For a free consultation on this matter and an array of others, contact the team of esteemed securities attorneys at Malecki Law. It is both your benefit and your legal right to have the accuracy of your securities data reviewed by legal professionals. We believe that our financial markets are only as strong as the consumers who make solid, informed investments that allow securities industry to flourish.

Last week's July 3rd edition of the New York Times reports that past and present brokers from mutual fund giant JPMorgan Chase were encouraged to favor JPMorgan products in their financial advisement to customers, even when competitor products were better performing or better suited to a consumer's budget. Moreover, JPMorgan marketing materials are said to have exaggerated the profits made from at least one major offering. For a further definition of misrepresentation and unsuitability, as well as an understanding of potentially defective products, visit the Investors section of our firm's website.

JPMorgan's marketing measures appear to have led to several profitable post-crisis years for the company. This success has come despite a volatile market that has shaken investor confidence in funds, and findings from fund researcher Morningstar that since 2009, 42% of JPMorgan funds have failed to meet the average performance of comparable products.

There has been concern from market analysts that consumers in many cases are being sold JPMorgan products based on theoretical returns over actual performance. Apparently, one balanced JPMorgan portfolio boasts professes a hypothetical return of 15.39% of fees after fees over three years, the reported return was 13.87%, lower not only than the advertised hypothetical, but also the standard of comparison JPMorgan depicts in marketing materials.

While many larger firms have refocused their efforts on advisement of working class investors, JPMorgan's practice of selling its own created funds remains controversial due to potential conflicts of interest. In 2011, JPMorgan was the only bank among the ten largest fund companies. That same year, the company paid $373 million dollars in arbitration after a panel ruled that favoritism had been shown by the bank toward its own products.

"It said financial adviser on my business card, but that's not what JPMorgan actually let me be," JPMorgan broker Mathew Goldberg told the Times. "I had to be a salesman even if what I was selling wasn't that great."

With this apparent greater emphasis placed on selling funds, JPMorgan is reported to have added hundreds of brokers in its branches since 2008, bringing its total to roughly 3,100. These brokers offer investors, among other pieces, grouped packages of stocks and bonds, ranked into six levels of risk.

Much of what JPMorgan earns from these sales stems from annual fees, which can be as high as 1.6% of total profits. Unlike many sellers of funds, it is reported that JPMorgan does not waive fees and expenses that would be charged from its own products.

As an in-house incentive to selling company products, JPMorgan is purported to have circulated lists of brokers whose clients collectively have with the largest amounts in the Chase Strategic Portfolio, one such popular product among customers. Top advisers are reported to have nearly $200 million in assets in the program.

The debate over JPMorgan's approach toward the sale and marketing over its own products market highlights the importance of investors rights to necessarily information and candor from their brokers. It is the right of all investors to be granted any publicly available information pertaining to the truest value of their portfolio and its components. Selective omission of such information toward certain customers clearly goes against financial practices regulated as law by the SEC. If you or someone you know believes that the treatment of JPMorgan's portfolios of funds have done harm to their finances, it is within their rights and best interests to contact a legal professional.

In the wake of $2 billion of trading losses at the UK unit of JPMorgan Chase, new focus from US regulators has been placed upon London as a haven for excessive trading risks and broker negligence. And while JPMorgan Chase is said to have begun its own analysis into how safe it is to conduct major decisions pertaining to American investors from London offices, the issues of how and why London holds such appeal for investment firms remain arguably worrisome. To learn more about sales practice violations, visit the Investors page of our firm's website.

Last month Gary Gensler, the chairman of the Commodity Futures Trading Commission, cited on trading losses from JPMorgan, AIG, and Citigroup as instances of supposedly risky maneuvers from London having consequences for US investors.

"So often it comes right back here, crashing to our shores... if the American taxpayer bails out JPMorgan, they'd be bailing out that London entity as well," he told the House financial services committee.

JPMorgan is said to have done intensive lobbying to avoid regulation of their London derivatives operations being managed by the CFTC, allegedly arguing that the firm will risk loss of business from major European players like Deutsche Bank and Barclays if forced to adopt America's stricter laws, which require higher collateral from clientele.
The "light touch" methods practiced by the UK Financial Services Authority are said to have been favored and replicated by the US Congress in years preceding the nation's financial crisis of 2008. It seems the rationale behind such lenience was the concern that financial market business would move to the comparatively lax England with even greater frequency.

Seeking to remain appealing to foreign investors, it's said that London firms have often resisted impending regulations on the part of the European Union and its own national government. Reports suggest that UK regulators are alarmed by this growing pattern of overseas firms getting into trouble in London. Much of the concern toward this trend is in how large American and Swiss banks run their UK entities as "branches" rather than "subsidiaries", the accusation of foul play being that these are "branches" in name alone, branded as such so as to shirk supervision from local authority.

The New York Times's Dealbook section last week reports that the Commodity Futures Trading Commission has fined financial services giant Barclays $200 million, effective June 27th, as a result of the company's attempts to manipulate a key interest rate - the London Interbank Offered Rate, or "Libor". To learn more about defining market manipulation and its effect on consumer investment, visit the Investors section of our firm's website.

In a follow up to this news, the July 3rd edition of the Wall Street Journal reports that Barclays CEO Robert Diamond has apologized for the scandal in a letter to employees, pledging to implement new controls to prevent such incidents in future. While company chairman Marcus Agius has resigned in the alleged manipulation's wake, Diamond is said to have no intentions of doing the same. Investigations into potential manipulation by Barclays and other banks have British officials debating how to set Libor rate, and how to deter these supposed corrupt practices.

This proverbial reeling in of a big fish has caused CFTC supporters on Washington - among them members of the Obama administration and Congressional Democrats - to bring attention to the commission's value as surveyors of the financial industry, and to propose a CFTC budget increase. U.S. regulators are said to have been impressed with what they deemed the "nature and value of Barclays' cooperation has exceeded what other entities have provided in the course of this investigation."

When combined with citations against Justice Department and London regulators pertaining to Barclays' actions, the fine totals $453 million and is purported to be the biggest in the commission's history. That $453 million sum is apparently far greater than the commission's current annual budget. After receiving $205 million from Congress for 2012, Republicans moved to decrease the CFTC's budget by 14 percent, to $180 million. This decrease has come on the verge of ramped up enforcement from the commission: the CFTC has brought 99 actions in 2012, having brought only 25 in the previous fiscal year.

The result of Barclays' prompt payment of the fine is twofold. It was proposed in the Journal's coverage that executives considered payment to be a swift resolution that would comfort investors and remedy concerns as quickly as possible. Yet the Journal also suggests that many investors are concerned by the high cost of the settlement, and the release of emails in which Barclays traders are alleged to have explicitly detailed attempts at interest rate manipulation.

Much of this newfound proactive streak stems from the Dodd-Frank Act of changes to regulation, which granted the CFTC new capabilities to bring investigations and penalties to those who have broken financial laws. Prior to Dodd-Frank, the agency monitored the less volatile futures market, and had little sway in regulation of the industry at large.

The CFTC's specified accusation against Barclays focused on the British bank's attempts to manipulate specified interest rates to their liking. These interest rates are vital to the determination of lending rates.

President Obama is seeking a $308 million budget for the agency. Even with that $120+ million increase, the agency would remain Wall Street's smallest regulator. All money procured from CFTC fines goes not to maintenance of the commission, but instead comes directly to the Treasury Department.

For new and experienced investors alike, having the best possible intelligence and data motivating one's investments is the difference between either making smart investments, or being led astray by those brokers who aim to deceive. For a free consultation on this matter and an array of others, contact the team of esteemed securities attorneys at Malecki Law. It is both your benefit and your legal right to have the accuracy of your securities data reviewed by legal professionals. We believe that our financial markets are only as strong as the consumers who make solid, informed investments that allow securities industry to flourish.

Three New York investors have filed a class action complaint - dated May 23rd - against Facebook and chief executive Mark Zuckerberg, in addition to lead underwriter Morgan Stanley and an array of secondary underwriters (including JPMorgan Chase, Barclays Capital, Goldman Sachs, and Merrill Lynch) claiming that negative information about the social network's initial public offering was withheld. Monetary damages are to date unspecified. The suit was filed by Robbins Geller, a firm that years ago earned plaintiffs $7 billion in a suit against Enron.

A failure to disclose information unilaterally among all investors could potentially be considered a form of misrepresentation and fraud, as well as a breach of fiduciary duty. For further explanation of these possible charges and more, visit our Investors page.

Particularly interesting and possibly advantageous for the plaintiffs is that Morgan Stanley's chief analyst Scott Devitt - famed for his accurate, bearish predictions in recent years that Google and Amazon stock would drop - is alleged to have cautioned preferred customers against zealous purchase of Facebook stock. Morgan Stanley controlled both the process of Facebook's trading and over 38 percent of Facebook shares sold. Devitt's and other analysts' revised revenue forecasts were shared via phone calls with institutional investors - but not with retail investors - before public trading of the stock began. These forecasts outlined expectations for how Facebook would fare into the second quarter and throughout 2012. Robbins Geller's statement against the underwriters thus argues that the prospectus "contained untrue statements of material facts."

"It appears as though material information was not disclosed," said the plaintiffs' lead attorney Robert Weiser. "We believe that the offering was conducted unfairly and it harmed public stockholders." Facebook itself released an amended prospectus acknowledging the possibility of reduced revenue in light of users visiting the site with increased frequency on ad-free mobile devices.

Under federal law, insiders and forecasters of an IPO are prohibited from issuing earnings forecasts during what's known as a "quiet period" (or waiting period) , which according to the SEC's website "extends from the time a company files a registration statement with the SEC until SEC staff declare the registration statement 'effective.' During that period, the federal securities laws limit what information a company and related parties can release to the public."

Numerous problems plagued Facebook's first day of trading, resulting in losses of roughly $2.5 billion for the small investors. Among them was an alleged underwriting of shares by Morgan Stanley that could potentially be deemed fraudulent in court. Morgan Stanley had allegedly bought around 420 million shares from Facebook, but sold around 480 million shares to the public by short-selling an additional 60 million shares, which if proven in court could be deemed a fraudulent underwriting of the shares.

While a Facebook spokesperson publicly stated that "We believe the lawsuit is without merit and will defend ourselves vigorously," no other further statements have been made by representatives of the underwriters.

The controversy surrounding Morgan Stanley's handling of Facebook's emergence onto the market is a reminder that it is the right of all investors to be granted any publically available information pertaining to the truest value of their portfolio and its components. Selective omission of such information toward certain customers clearly goes against financial practices regulated as law by the SEC. If you or someone you know believes that the treatment of Facebook's IPO by Morgan Stanley and its fellow underwriters has done harm to their finances, it is within their rights and best interests to contact a legal professional.

Since the financial crisis of 2008 collapse of Lehman Brothers and beyond, the need for regulators to create new means of quelling excessive risk has been met with questions remain as to how effective these rules have been. Many of the new post-crisis rules have not yet gone into effect, and even once executed, a broker's capability for evasion remains. To learn more about regulation on a national scale, visit the Governmental, Regulatory, and Self-Regulatory Proceedings page of our firm's website.

A section of the Dodd-Frank Act legislation, the Volcker Rule, is to be implemented over the next two years with an aim at averting certain types of trading. While this regulation prevents banks from doing speculative trades with their own money, it will not stop hedging activities. The Volcker Rule contains guidelines that are meant to help regulators decide whether a hedge masks proprietary trading.

Other parts of Dodd-Frank resist undue risk more covertly. The Act looks to shift many derivatives to central clearing houses, the groups who collect the payments on a trade. This is said to theoretically strengthen the market, because companies are required to back their trades with margin payments of cash or safe securities. In theory, the financial burden of supplying margin to clearinghouses could make excessively risky trades restrictively expensive, and therefore less attractive for banks.

Yet the derivative in many loss-making trades is already centrally cleared in large amounts, according to figures from clearing house ICE Clear. If such positions are executed through a clearing house, it would mean that the added costs of clearing did not prove a deterrent, and might not stop similar traders in the future.

However, one part of these regulatory efforts may yet serve as a disincentive. Regulators look to demand much higher margin payments on derivatives. If regulators do set this new margin above current clearinghouse levels, such trades may become too expensive for banks.

New international banking regulations set by the Basel Committee offer further encouragement for regulators. In legally binding documentation, they will require banks to hold a lot more capital against high risk/reward trading positions. JPMorgan Chase's chief executive Jamie Dimon last week said in Congressional testimony that the new Basel rules' impact on JPMorgan's credit bets could be capable of raising the "risk-weighted" value of one high profile credit derivatives portfolio from $20 billion to $60 billion. Here, a tripling of the position's risk-weighted size would lead to a tripling of capital held against it. Notably, proposed Basel trading rules could force banks to hold more capital if regulators see evidence that hedges may not perform effectively in distressed situations.

For new and experienced investors alike, having the best possible intelligence and data motivating one's investments is the difference between either making smart investments, or being led astray by those brokers who aim to deceive. For a free consultation on this matter and an array of others, contact the team of esteemed securities attorneys at Malecki Law. It is both your benefit and your legal right to have the accuracy of your securities data reviewed by legal professionals. We believe that our financial markets are only as strong as the consumers who make solid, informed investments that allow securities industry to flourish.