Colling, Gilbert, Wright & Carter Securites Fraud

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Sunday, February 28, 2010

Morgan Keegan Legal Fees Skyrocket Due to RMK Bond Fund Litigation

Morgan Keegan & Co. Inc.'s legal fees and related expenses costs have increased dramatically over the past several years, due in large part to ongoing litigation over losses sustained by investors who purchased RMK Morgan Keegan bond funds. The Funds imploded in late 2007, some losing nearly 95% of their value allegedly due to high concentrations of subprime mortgage related derivatives and tranches.

According to a recent Investment News article, legal fees accounted to approximately 12% of total revenue for the brokerage unite of Regions Bank. This percentage far exceeds the legal fees (as a % of revenue) for most other brokerage firms.

Also, Morgan Keegan has suffered significant arbitration losses over the past week. Arbitrators in two separate claims awarded $2.5 million and $1.1 million to RMK Fund investors.

Additionally, in July of last year, the Securities & Exchange Commission (SEC) issued a Wells notice to Morgan Keegan related to the bond funds. This could mean the SEC is contemplating disciplinary action against the firm for the marketing and sale of the RMK bond funds.

If you have lost money in the RMK Morgan Keegan bond and income funds, please contact our offices for a free case evaluation. Thank you.

posted by William B. Young Jr. Esq. at 12:07 PM

Thursday, February 18, 2010

FINRA Proposes New Reporting Rules for Customer Complaints

The Financial Industry Regulatory Authority (FINRA) issued a press release indicating they are proposing positive changes to the BrokerCheck system whereby all broker complaints will stay on the registered representative's record for 10 years. Under the old guidelines, complaint information dropped of the Central Record Depository (CRD) two years after the broker left the industry. This is widely viewed as a positive step in reporting requirements and helpful to investors pursuing claims against firms and their representatives. The full press release may be found below:

FINRA Proposes Further Expansion of Broker Information Publicly Available Through BrokerCheck
Washington, DC — The Financial Industry Regulatory Authority (FINRA) announced today that it is seeking authority to significantly expand the amount of information available to the public on current and former securities brokers through its free online BrokerCheck service.

The proposed expansion – which FINRA will submit to the Securities and Exchange Commission (SEC) in the near future – would increase the number of customer complaints reported publicly; extend the public disclosure period for the full record of a broker who leaves the industry from two years to 10 years; and, make certain information about former brokers available permanently, such as criminal convictions and certain civil and arbitration judgments.

"These proposed changes will provide additional information to investors who are considering whether to conduct, or continue to conduct, business with a particular securities firm or broker," said FINRA Chairman and CEO Rick Ketchum. "Just as important, they will provide valuable information about persons who have left the securities industry, often not of their own accord, but who can still cause great harm to the investing public. Recent regulatory and criminal proceedings in the financial services sector reveal that former brokers have been engaging in fraud and other misconduct long after establishing themselves in other segments of the financial services industry."

Specifically, FINRA's proposed expansion of BrokerCheck would:

Disclose all "historic" complaints against a broker dating back to 1999, when electronic filing of broker information began. Generally, historic complaints are customer complaints, arbitrations or litigations more than two years old that have not been adjudicated or have been settled for an amount less than the reporting requirement (currently $15,000). They are currently reported on BrokerCheck when the broker has three or more currently disclosable regulatory actions, customer complaints, arbitrations, litigations or historic complaints.

The new proposal would disclose all historic complaints dating back to 1999 for individual brokers who are currently registered or whose registrations were terminated within the preceding two years. If the SEC approves the entire package of BrokerCheck expansion proposals, the reporting of historic complaints would apply to brokers whose registrations were terminated within the preceding 10 years. Expand the disclosure period for former brokers. Currently, a broker's record is publicly available for two years after he or she leaves the securities industry. That two-year period coincides with the period in which an individual remains subject to FINRA's jurisdiction and within which an individual can return to the industry without having to take requalifying exams.

The new proposal calls for making a former broker's record public for 10 years, so investors can access information about individuals who may work in other sectors of the financial services industry or who have attained other positions of trust.
Further expand the amount of information that is permanently available on former brokers. Last year, BrokerCheck started making information about final regulatory actions (i.e., bars, suspensions, fines, etc.) against former brokers permanently available to the public. The new proposal would make additional information permanently available – including criminal convictions or pleas of guilty or nolo contendere; civil injunctions or findings of involvement in a violation of any investment-related statute or regulation; and arbitration awards or civil judgments based on the individual's involvement in an alleged sales practice violation.

FINRA, the Financial Industry Regulatory Authority, is the largest non-governmental regulator for all securities firms doing business in the United States. Created in 2007 through the consolidation of NASD and NYSE Member Regulation, FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating industry participants to examining securities firms; writing rules; enforcing those rules and the federal securities laws; informing and educating the investing public; providing trade reporting and other industry utilities; and administering the largest dispute resolution forum for investors and registered firms.

If you believe you may have lost money due to broker negligence or fraud, please contact our office for a free case evaluation. Thank you.

posted by William B. Young Jr. Esq. at 10:26 AM

Wednesday, February 10, 2010

UBS Continues to Lose Clients and Brokers over Recent Scandals

Union Bank of Switzerland's (UBS) Wealth Management division is still reeling from the multiple scandals that have plagued the firm for the past two years. Fresh on the heals of the accusations from the IRS that UBS was helping wealthy clients avoid income taxes came the structured note products that allegedly lost over a billion dollars for U.S. retail investors.

Many of the structured notes were marketed as "Principal Protected" or "Partially Principal Protected" but were actually backed by Lehman Brothers Holdings. As such, many clients have alleged they were lead to believe by UBS representatives they were buying relatively safe investments when in reality they were buying senior unsecured Lehman debt. The fallout following Lehman's bankruptcy filing on September 15, 2008 lead to both client and broker defections as well as a serious hit to the firm's brand image.

The following article from Smartmoney.com details UBS's struggles:

UBS AG's Wealth Management Americas unit continues to be plagued by asset outflows, as clients took out $11.6 billion in the fourth quarter--its third straight quarter of asset withdrawals.

The majority of outflows--$10.5 billion--came from within the U.S., as the brand has been damaged by a dispute with U.S. tax authorities over bank secrecy. UBS was also stung by financial adviser departures and limited recruiting of experienced brokers.

The wealth manager also reported a 3% drop in its adviser headcount, though more than a third of that decline was from advisers working in branches that were sold to Stifel Financial Corp. (SF).

Data on the wealth manager were revealed as parent company UBS reported its first quarterly profit in more than a year.

Total operating income at the UBS unit dropped 3% to $1.34 billion from $1.39 billion a year earlier, and nearly level with $1.33 billion at the end of the third quarter. Pre-tax profit plunged by more than a third to $171.5 million from $263 million a year earlier. UBS Wealth Management Americas posted a $106 million profit at the end of the third quarter.

The U.S. wealth management unit lost 202 advisers in the fourth quarter, 74 of whom went to Stifel. Overall, the advisory force's headcount fell to 7,084 from 7,286 at the end of the third quarter. A year ago, the brokerage had 8,607 advisers. Since that time, UBS has sold lower-producing branches, laid off rookie financial advisers, and suffered some attrition to its competitors.

By contrast, UBS' main rivals have much larger brokerage forces. Morgan Stanley Smith Barney has 18,135 advisers, Bank of America Corp.'s (BAC) Merrill Lynch boasts 15,006 brokers, and Wells Fargo & Co.'s (WFC) adviser headcount is 14,961.

During a conference call with analysts Tuesday, UBS Chief Financial Officer John Cryan said, "Despite the improvement in profitability [at the unit], financial adviser recruiting and net new money generation remain challenging."

For months, the UBS unit has been lagging behind its competitors in recruiting brokers as the firm put a hold on bringing in new talent. UBS's U.S. brokerage, however, recently rolled out a new recruiting deal in mid December that offers top-tier advisers as much as 280% of their annual production. That figure is up from a previous offer of 220%.

The UBS unit got new leadership during the quarter. Robert McCann was appointed head of Wealth Management Americas at the end of October. Since taking that position, McCann has offered some brokers a retention-like deal to stay with the firm, made several executive appointments, and reorganized the U.S. retail brokerage into two divisions from three regions.

"Bob McCann has put a new leadership team in place and we're optimistic for the longer-term prospects of the business," Cryan said during the call.

Alois Pirker, a research director at Aite Group, said in an emailed statement, "Outflows [at UBS] have increased in contrast to many of its competitors."

He said UBS's 2009 results "have shown that the firm still has not been able to regained the trust of its wealthy clients and that its competitors continue to take significant market share from the firm."

A UBS spokeswoman declined to comment on the statement. However, she referred to comments made by UBS Chief Executive Oswald Gruebel and Chairman Kaspar Villiger in a letter to shareholders Tuesday.

"In the coming quarters, we expect to see the effects of the progress we have made in improving operating efficiency, reducing risk, and rebuilding and re-focusing our businesses," the executives said.

"We are confident that the measures we are taking to address the causes of client asset outflows will be effective, but in the immediate future still expects to report outflows, with some pressure on margins," Villiger and Gruebel said.
-By Brett Philbin, Dow Jones Newswires; 212-416-2173; brett.philbin@dowjones.com

(END) Dow Jones Newswires

The attorneys at Colling Gilbert Wright & Carter are currently investigating and filing individual arbitration claims on behalf of former UBS cliens who were sold UBS structured notes. If you have lost money due to an investment in a UBS structured product, please contact our office for a free case evaluation. Thank you.

posted by William B. Young Jr. Esq. at 7:22 AM

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