New York Securities Lawyers Blog

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.

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.

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.

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.

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.

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.

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?

Continue reading "UBS to Reclassify Bond Investors as "Aggressive"" »

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.

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.

The Financial Industry Regulatory Authority ("FINRA"), issued a news release on June 4, 2012 announcing that a FINRA hearing panel fined Brookstone Securities $1 million for the fraudulent sales of Collateralized Mortgage Obligations to elderly investors. In addition, FINRA ordered restitution from the firm and the individuals involved and permanently barred the firm's Owner/CEO and one of the firm's brokers from the securities industry. The firm's Chief Compliance Officer was suspended by FINRA for two years.

FINRA found that from 2005-2007, Brookstone, through its employees, "made fraudulent misrepresentations and omissions to elderly and unsophisticated customers regarding the risks associated with investing in CMOs." Many of the alleged defrauded customers were senior citizens, including two women who were recently widowed. The customers allegedly feared losing their assets and relied on Brookville to keep their retirement funds safe. However, CMOs were apparently actually high-risk investments that were unsuitable for senior investors seeking income and principal protection.

Unfortunately, all too often brokers sell high-risk investment products like CMOs to elderly investors 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 reverse convertible notes, contact the securities fraud lawyers at Malecki Law for a free consultation and case evaluation at (212) 943-1233.

Tonight, June 5, 2012, on the 6 O'Clock Evening News on CBS 2 New York, the lawsuit filed by Malecki Law on behalf of forty-three investors in the alleged Ponzi scheme run by Robert Van Zandt will be featured.

This past December, Malecki Law announced the filing of a civil arbitration complaint with the Financial Industry Regulatory Authority against MetLife Securities for more than $4 million on behalf of twenty-four investors. In March, Malecki Law announced that the complaint had been amended to include additional nineteen investors totaling roughly $9.2 million in claims.

The attorneys at Malecki Law continue to take calls and anticipate either adding future victims to the existing claim or commencing a second action, if necessary. We urge anyone with knowledge about the Van Zandt Agency or MetLife Securities supervision (or lack thereof) over the office to contact us. 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.

A headline of the New York Times' Sunday Business section published May 19th, Gretchen Morgenson asks "Is Insider Trading Part of the Fabric?", raising a potentially distressing question for regulators and market analysts alike. Morgenson profiles the woes of one Ted Parmigiani, a Lehman Brothers investment analyst whose career was apparently placed in peril in 2004, when his research was allegedly leaked by a colleague in his research department. Parmigiani was then planning to raise his assessment of computer chip producers Amkor Technology. The leak was apparently discovered by Parmigiani on the planned date of his announcement, when Amkor's price quickly shot up that morning, an hour before his new assessment was to be broadcast. Such are the dangers those working in investment too often face, and therein lies the potential for such figures to become brave whistleblowers. Visit the Practice Areas section of Malecki Law's website to learn more about the firm's work in aiding whistleblowers of fraud and further financial corruption.

Parmigiani responded by spending years providing information to the Securities and Exchange Commission (SEC) about the trading and research climate at Lehman, where suspicious trades were all too common, and sales reps and analysts illegally shared both office space and data. As part of 1.4 billion collective settlement paid by Lehman and nine other firms following an Eliot Spitzer-induced inquiry into insider trading, Lehman agreed to separate analysts from sales teams. Parmigiani says he was asked to ignore this supposed divide, write praise for investment banks whether it was merited or not, and explicitly told not to make negative comments about Lehman-favored companies and executives.

Parmigiani alleged that Lehman traders were often advised of changes to analysts' company ratings before the revisions were publicly announced, and that traders were tipped off by analysts so that they would make hedge bets with Lehman's own money. According to reports, announcement of Parmigiani's recommendations were delayed by sales management for days at a time for no justified reason. In the Times article Parmigiani compares his actions to his time in the U.S. military, where the duty to disobey unlawful orders was instilled. Following his outrage over the Amkor incident, Parmigiani was fired from Lehman and found himself unable to find work at comparable Wall Street firms.

Despite assertions from regulators that insider trading is today prosecuted with greater frequency and accuracy, Mr. Parmigiani's story speaks to what many authorities consider to be a system-wide epidemic. Such observers might argue that for every SEC conviction of a notorious inside trader - such as billionaire Galleon hedge fund manager Raj Rajaratnam - there is an instance such as that of Bernard Madoff, whose financial crimes went unprosecuted for years despite alarming warning signs.

To their credit, the SEC takes a contrary public stance on Parmigiani's claims. Spokesman John Nester asserts that the SEC performed an extensive review of the claims against Lehman, reviewing "nearly 100,000 e-mails" and conducting numerous interviews with Lehman employees before determining that there "simply was not any evidence in this case to support the conclusion that Lehman, its employees or its clients had committed insider trading." Morgenson further notes that for critics, the issue is not the number of SEC prosecutions of insider trading, but the typically minor targets and sums fined. The article notes two major exceptions: a recent $22 million dollar fine to Goldman Sachs, and a 2007 case against a researcher at Swiss bank UBS that resulted in charges against eight individuals, one of whom went to prison.

Parmigiani cites the 2008 financial crisis, coupled with Lehman's subsequent insolvency, as the point at which the SEC's interest in his case faltered. Independent analysis from Babson College professor of finance Steven Feinstein was presented by Parmigiani to the SEC in 2010. Feinstein's report concluded that Lehman had engaged in "tipping" that directly changed the stock price and caused damages for investors. Yet Nester again argues in favor of the SEC's inquiry with direct company sources over autonomous investigations such as Feinstein's. "Our staff can and does interrogate witnesses, review contemporaneous documents, including e-mails, and scrutinize records," says Nester. "That is evidence, and that is what determines whether insider trading has occurred."

The degree to which investors and insiders alike rely upon the SEC to act as the most steadfast regulatory body it can be is apparent. As the stakes of investment grow only larger, the temptations of many such brokers and hedge managers toward gaining illegally obtained information loom large. It seems that whether Ted Parmigiani and like-minded critics of these regulatory efforts are correct in believing that the Commission is failing to correct preventable damages will be confirmed or denied by the SEC's tenacity amidst growing concerns of insider trading, and as always in the passing of legislature that further regulates practices that place investors in unreasonable harm.

On Thursday May 17, 2012, the New York Attorney General Eric Schneiderman issued a press release announcing the filing of a summons and complaint to recover funds for investors. The filing coincided with an earlier press release disclosing that Mr. Robert (Bob) H. Van Zandt had been indicted and arrested for criminal charges stemming from some of the same activity that formed the factual basis for the civil filing.

The New York Attorney General's civil filing noted that Mr. Van Zandt issued promissory notes totaling over $35 million to over 250 investors, most of whom were unsophisticated and invested the bulk of their life savings in the scheme. The filing alleged that these promissory notes were securities sales that were not properly registered with the requisite governmental offices in New York State and, while stated to be suitable for self-directed IRAs, were at best "highly speculative."

The civil filing also alleged that while the Van Zandt Agency, by Mr. Van Zandt, sold the promissory notes with the understanding that the money collected would be used to fund real estate purchases and real estate development, in reality bank loans were used to fund certain purchases and construction, while other projects were never even commenced. The civil filing further alleged that no investors received security in the form of mortgages or otherwise, and that the money was converted for personal use or used to pay interest claims of other investors, essentially a Ponzi scheme.

Malecki Law already represents a very large group of investors against MetLife Securities, Inc. in a $9.5 million arbitration proceeding before the Financial Industry Regulatory Authority (FINRA) and is investigating bringing other actions against other broker-dealers for their possible role in dealing with Mr. Van Zandt and the Van Zandt Agency. Any investor who has questions concerning any investment made with Mr. Van Zandt or the Van Zandt Agency should contact an attorney at Malecki Law to discuss whether they may qualify for such a claim.

The New York Attorney General Eric T. Schneiderman announced today the unsealing of a 35-count indictment of and the arrest of Robert H. Van Zandt, a Bronx tax preparer who for years sold promissory notes in alleged real estate investments "guaranteeing" high rates of interest return. He sold these promissory notes out of his tax preparation business, the Van Zandt Agency, while he was licensed by various broker-dealers to sell securities.

Malecki Law currently represents a large group of investors who purchased promissory notes totaling almost $10 million in aggregate from Mr. Van Zandt in an arbitration before the Financial Industry Regulatory Authority ("FINRA"), the independent regulator of securities companies. The arbitration is pending against MetLife Securities, Inc., a broker-dealer who employed Mr. Van Zandt during a period in his career. While investors purchased the promissory notes directly from Robert Van Zandt and through the Van Zandt Agency, he was then licensed by MetLife Securities, Inc. to sell securities, and MetLife was required to perform certain supervisory and audit duties as a result of that employment relationship.

Malecki Law is also investigating the potential for other actions against other broker-dealers arising from Mr. Van Zandt's alleged real estate investments.

Broker-dealers owe heightened audit and supervisory duties of these off-site and often unregistered offices because promissory note fraud and other Ponzi-like frauds and schemes have become common. Under FINRA Rules, SEC guidance and prevailing industry standards, broker-dealers have affirmative duties to oversee and supervise the conduct of their associated persons, both inside and outside of their offices.

Specifically, firms have been repeatedly advised, both through FINRA Rules, NASD Rules and FINRA/NASD Notices to Members, to beware of certain improper or fraudulent activities which are regularly conducted and can have devastating effects on customers. Notice to Members 98-38 specifically outlined that geographically diverse offices present supervisory risks and potential problems in detecting faulty sales practices.

FINRA has, itself, has recently fined firms for lax supervisory performance, or inadequate systems for detecting potential fraud. Mr. Van Zandt, through the Van Zandt Agency, operated a tax preparation business, creating the sort of environment that would require heightened supervision.

The New York Attorney General noted in their press release that the fraud continued through at least 2011 and involved at least $4.6 million. We believe it was a larger scheme. Investors who believe they purchased similar investments through Mr. Van Zandt or any other employee at the Van Zandt Agency should immediately contact an attorney at Malecki Law to see if they qualify for an action against a broker-dealer who licensed and employed these individuals during the relevant time period.

Malecki Law is currently investigating whether investors were improperly sold Leveraged and Inverse Exchange-Traded Funds (ETFs) by any of the following Broker-Dealers: Citigroup Global Markets, Inc., Morgan Stanley & Co, LLC, UBS Financial Services, and Wells Fargo Advisors, LLC.

The Financial Industry Regulatory Authority (FINRA) announced that they had fined the above firms for selling leveraged and inverse ETFs without proper supervision.

Any investors who purchased a leveraged or inverse ETF from any of these firms and believe the products were unsuitable for then should contact an attorney at Malecki Law to explore their legal rights.