Colling, Gilbert, Wright & Carter Securites Fraud

According to a June 30, 2009 article in the Memphis Commercial Appeal Regions Financial is disputing a report by in trade publication American Banker (AB)that the bank plans to sell it brokerage unit Morgan Keegan.

According to the article, Regions Morgan Keegan remains an integral part of Regions Financial Corp., which has no plan to sell its Memphis-based investment firm.

The AB article, which used named and unnamed sources, suggested that if Regions were to suffer more, significant loan losses, it might have to sell Morgan Keegan to find extra capital. This is not a new strategy and one employed by Citigroup when it entered into a merger agreement to transfer half ownership of Salomon Smith Barney to Morgan Stanley.

A portion of the article appears below:

Birmingham-based Regions Financial recently raised $2.5 billion required by the Treasury in response to the government's stress tests of banks. The idea was to prepare banks should the economy falter even more.

Regions was able to raise the capital in just over a month.

But to do so, it deeply discounted -- by 24 percent -- bank shares in a stock offering and may not be able to use that source again, the American Banker reported. Also, the bank offered to swap up to $700 million in common stock to the holders of debt securities paying 6.625 percent. But the offering achieved just a 29 percent acceptance, generating $202 million for the bank, the American Banker noted.

Regions spokesman Tim Deighton described the report as "very speculative.''

"Our capital levels are among the highest of our peers. We raised $2.5 billion in a little over a month. Any suggestions that we need to raise additional capital are highly unfounded," he said.

For the stress test, the government hypothetically imposed a worst-case scenario of $9.2 billion in loan losses for Regions over the next two years, which is higher than most people expect, Deighton said.

"The nature of our credit issues has not changed," he said.

Regions loan problems are centered in Florida and the Atlanta areas. Most of the bad loans were made to home builders, and for condos and land.

Other types of loans, such as traditional first mortgages and commercial and industrial loans, are not as big a problem for the bank, and Regions is not in the credit card business.

"We've been very aggressive in identifying and working out troubled loans," Deighton said.

A senior bank research analyst for FTN Equity Capital Markets agrees.

Regions has raised enough capital to endure a significant downturn in the economy, Marty Mosby said.

"The second thing to keep in mind is that Regions management has been very consistent about Morgan Keegan being a part of their core business," he said.

Regions has integrated Morgan Keegan into its banking units, "making sure they cross-sell and expanding relationships across both entities," Mosby said.

The integration of Morgan Keegan and Regions has been under way several years.

"Given those two facts, I think it's realistic to think management doesn't have a motivation to sell and at this point are not in a position where they have to sell," Mosby said.

Another condition that would discourage any sale is the sum Morgan Keegan would bring to Regions right now, said Christopher Marinac, director of research for FIG Partners.

Region's couldn't get the price they'd want in the current economy, he said.

"They would want something north of a billion dollars, and I'm not sure if that price is available to them," Marinac said.

"My expectation would be they don't sell Morgan Keegan until they can get a price they desire."

Meanwhile, FIG Partners is rating Regions shares to perform in line with other bank stocks.

Regions Stress Test

Worst-case scenario: If the economy worsens, bank could be saddled with $9.2 billion more in bad loans over the next two years

Had to raise: $2.5 billion in capital just in case

What now? Aggressively working to sell off its bad loans involving second mortgages and loans to home-builders and for condos.

Morgan Keegan: Investment firm, a subsidiary of Regions Financial, has more than 300 offices in 19 states

Our firm is currently investigating and filing claims on behalf of Morgan Keegan clients who suffered substantial losses in the Regions Morgan Keegan (RMK) bond and income fund. If you lost money in one of these funds, please contact our offices for a review of your options for recovering your losses. Thank you.

Labels: broker misconduct

Touted as an efficient and sensible way to invest for retirement, target date funds have come under scrutiny for not living up to their promise. According to a June 24, 2009, NY Times article, some of the funds may not provide the returns (and in some cases provided losses) touted when they were sold, leaving prospective retirees short of the money they need to comfortably retire. Excerpts of the article appear below:

Washington blessed them as a way to put your 401(k) on automatic pilot and glide safely toward retirement. But popular target-date mutual funds have badly missed the mark — and now regulators are asking why.

The Securities and Exchange Commission and the Labor Department are examining why the funds, which were supposed to become safer as their investors grew older, seemed to get riskier instead.

Big mutual fund companies like Fidelity and Vanguard promised that target-date funds would shift automatically from high-growth investments, like go-go tech stocks, toward safer ones, like bonds, as investors neared the year of retirement — a “target date,” like 2010, 2020 or 2030.

Labor Department officials evidently found the concept persuasive. In 2007, they issued an unusual rule that protects employers who automatically send workers’ 401(k) money to target funds if, later, the employees lose money. That so-called safe harbor unleashed a flood of money into the funds.

But as the stock market plummeted last year, some 2010 funds — which many investors thought would be invested safely by then to protect their nest eggs — lost 40 percent of their value. That showing was even worse than that of the Standard & Poor’s 500, which fell 38.5 percent.

Mary L. Schapiro, the chairman of the S.E.C., is now questioning whether fund companies misled investors about the risks associated with target-date funds, a concern the mutual fund industry says is unjustified.

Data collected by the S.E.C. shows that target-date funds vary widely in terms of their investment risks, even when they use similar target years or names. Even though federal officials put a stamp of approval on target-date funds, there are no clear standards about how they should work.

Funds marketed to people hoping to retire in 2010, for instance, have anywhere from 21 percent to 79 percent of their holdings in stocks, Ms. Schapiro said in a speech in New York last week, citing data collected by Morningstar.

No hard and fast rules exist for how to balance a portfolio as retirement approaches. A lot of variables come into play, including age, sources of income and appetite for risk. Some financial planners recommend that people who are at or near retirement age, and comfortable with some risk, invest about 40 percent of their portfolios in stocks.

But Ms. Schapiro said the S.E.C. was concerned that funds with the same target dates vary so widely in their investments and returns. The average 2010 fund had more than 45 percent of its holdings in stocks last year. The Fidelity Freedom 2010 Fund was 50percent in stocks and lost a quarter of its value, according to Morningstar. The AllianceBernstein 2010 fund was 57 percent in stocks and fell by a third.

Funds leaning toward safer bonds, by contrast, fared far better. A Wells Fargo 2010 fund that was heavily invested in bonds lost just 11 percent, while a Deutsche Bank fund that also favored fixed-income investments was down just 4 percent.

“Funds with the same target date in their names can be structured, and thus perform, very differently,” Ms. Schapiro said.

Target-date funds have exploded since 2006, when Congress enabled companies to make them the automatic choice for employees who do not specify where they wanted to invest their 401(k) savings. The move, a boon for the mutual fund industry, occurred over the objections of insurance companies, whose money market-style “stable value” funds had been the default choice for 401(k) investments. About $182 billion has been poured into target-date funds, and fund companies have set up scores of them.

Now, in a reversal, a number of bills before Congress seek to provide greater disclosure of fees, more accurate marketing and improved financial advice to workers investing in target-date funds and other 401(k) funds.

Critics of target-date funds maintain that these investments are often opaque and difficult to understand. Mutual fund companies often create them by bundling existing mutual funds, some with good track records and some with worse records. This “fund of funds” concept enables mutual fund companies to collect more assets and fees, but can make it hard for investors to understand what these funds contain or how they are being charged.

The S.E.C. is looking into whether putting a date in a fund’s name should be prohibited, whether there is enough information about the risk of these funds and whether they are properly structured to provide for a safe retirement. There is also legislation calling for greater fee disclosure, more objective investment advice and the inclusion of low-cost index funds in workers’ 401(k) plans.

If the combination of explosive growth and poor performance was not enough to raise alarms, another concern is that buyers of target-date funds are often the least sophisticated investors.

A study by Envestnet Asset Management and Behavioral Research Associations found a range of misconceptions, including that employees thought target-date funds would provide a guaranteed return, that their money would grow faster in target-date funds than in other investments, and that these funds allowed workers to put away less money and still be able to retire.

This conflict between perception and reality came into play at the joint S.E.C. and Labor Department hearing in Washington last week. Ms. Schapiro, the S.E.C. chairwoman, asked about the extent to which these funds “are marketed as the solution and pushed as a be-all and end-all.”
If you have lost money in a target date fund or funds, please contact our office for a free case evaluation. Thank you.

Labels: broker misconduct

According to a May 11, 2009 Reuters report, Regions Financial Corp., parent company of Morgan Keegan, may face charges for Morgan Keegan's role in the improper sale of auction rate securities (ARS).

Morgan Keegan is already facing hundreds of FINRA arbitration claims over the marketing and sale of its Regions Morgan Keegan Bond and Income Funds.

An excerpt from the Reuters article appears below:

Mon May 11, 2009 12:34pm EDT

NEW YORK, May 11 (Reuters) - The U.S. Securities and Exchange Commission may launch a civil proceeding against the Morgan Keegan & Co brokerage unit of Regions Financial Corp over the alleged improper sale of auction-rate securities, Regions said on Monday.

In its quarterly report filed with the SEC, Regions said the regulator filed a "Wells Notice" in March against Morgan Keegan. Such a notice indicates that civil action is possible, and gives the recipient a chance to mount a defense.

Regions said the SEC is investigating the adequacy of Morgan Keegan's disclosures of liquidity risks associated with auction-rate debt, and whether it sold a large volume of the debt after its ability to support the auctions was diminished. It said Morgan Keegan has cooperated with the SEC, and is buying back auction-rate debt it sold to retail customers.

Rates on auction-rate debt reset in periodic auctions. Regulators say brokerages misled investors into believing the debt was safe and the equivalent of cash. After the $330 billion market seized up in February 2008, many investors could not sell the debt or could sell it only at a loss.
Our firm is currently investigating and filing arbitration claims on behalf of investors seeking damages related to the Morgan Keegan bond funds and auction rate securities.

Labels: broker misconduct

The following article appered in the Memphis Daily News on April 9, 2009. It details the latest setback for Morgan Keegan and the latest victory for investors who were sold the toxic RMK Bond funds. The award given to former professional football playere Jerome Woods is believed to be the larges award agains the brokerage firm since the RMK Fund arbitration litigation began last year.

This decision marks the fifth victory in a row for Claimants in FINRA arbitration claims involving the marketing and sale of the bond funds that were allegedly conservative income investments but were instead concentrated heavily in subprime mortage debt. The full article appears below.

Memphis native and former professional football player has won the largest award yet from a financial industry panel hearing claims involving a group of former Regions Morgan Keegan mutual funds.

Jerome Woods, whose football career included a stint with the Kansas City Chiefs, has won $950,000 as a result of the arbitration claim he filed over losses in the RMK funds. Woods played ten seasons in the NFL with the Kansas City Chiefs, according to the team’s official Web site www.kcchiefs.com.

Woods’ Nashville attorney Naill Falls told The Daily News his client is pleased with the arbitrators’ ruling.

“Like most investors, the Woods were not interested in speculative risk, but Morgan Keegan recommended these highly risky funds indiscriminately, loading up their clients with these funds without disclosing their true risks,” Falls said.

Woods started his collegiate career at Northeast Mississippi Community College. He was drafted by the Chiefs in the 1996 NFL draft after two seasons with the University of Memphis Tigers.

The Financial Industry Regulatory Authority (FINRA) made the decision in the Woods case. Generally, the panel does not qualify its decisions.

Earlier this month, Morgan Keegan spokeswoman Kathy Ridley said about the results of the RMK arbitrations: “Overall results support our belief that there were no improprieties in the management of these funds. We plan to continue a vigorous defense of all claims.”

Memphis-based Morgan Keegan is a subsidiary of Alabama-based Regions Financial Corp. New York-based Hyperion Brookfield Asset Management took over the troubled RMK funds from Morgan Keegan last summer.

The firm, which also rebranded the funds under its Helios name, is not a party in any current claims or lawsuits by investors.

Losses in the funds have spawned a wave of securities litigation in addition to the arbitration claims. Among other recent arbitration awards, Memphis native and sports broadcaster Tim McCarver won $100,000 in compensatory damages in February as a result of the claim he filed over his own former RMK investments

If you have experienced losses due to the RMK bond funds, please contact our office to discuss your options for recovery. Thank you.

Labels: broker misconduct

According to a article that appeared in yesterday's (March 31, 2009) Wall Street Journal, Merrill Lynch In was hit with one of the biggest awards levied against a Wall Street by a The Financial Industry Regulatory Authority arbitration panel. The firm has been ordered to pay $39.8 million in a case that grew out of the collapse of financial firm Refco Inc. The FINRA panel awarded $30.6 million in compensatory damages and $9.2 million in interest to the
trustees of the Masonic Hall and Asylum Fund in Utica, N.Y.

The fund is an endowment for a health-care facility in Utica. It filed a claim against Merrill Lynch, now a unit of Bank of America Corp., alleging a subsidiary broker-dealer advised it to purchase a limited partnership interest in Sphinx Managed Futures Index Fund LP, a privately held fund in a business unit of Refco Inc.
Refco collapsed after announcing in 2005 that its chief executive hid $430 million in bad debts from the company's auditors.

Merrill Lynch released a statement saying it was disappointed with the ruling.
It said the case arose from investments that predated Merrill Lynch's 2005 acquisition of a regional broker-dealer, Advest, which had provided the Masonic fund with investment advice.

If you have lost money due to suspected broker negligence or fraud, please contact our offices for a free case evaluation.

Labels: broker misconduct

Morgan Stanley to Pay More than $7 Million to Resolve FINRA Charges Relating to Misconduct in Early Retirement Investment Promotion

Washington, DC - The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Morgan Stanley & Co. $3 million - and ordered it to pay more than $4.2 million in restitution to 90 Rochester, NY-area retirees - to resolve charges that its supervisory system failed to detect and prevent brokers from persuading Eastman Kodak Company and Xerox Corporation employees to take early retirement based upon unrealistic promises of consistently high investment returns and by espousing unsuitable investment strategies.

FINRA found that Morgan Stanley failed to reasonably supervise the activities of Michael J. Kazacos and David M. Isabella, two former registered representatives in its Rochester branch office. FINRA has permanently barred Kazacos from the securities industry for committing numerous violations of FINRA rules in connection with his solicitation and handling of IRA rollover/retirement accounts, such as making unrealistic predictions that customers would earn investment returns of 10 percent each year.

In a formal disciplinary complaint filed today, FINRA charged Isabella with having engaged in similar misconduct. The matter will be adjudicated before a three-member FINRA Hearing Panel. FINRA also found that Ira S. Miller, the manager of Morgan Stanley's Rochester branch, failed to reasonably supervise both representatives. Miller was fined $50,000, suspended from acting in a principal capacity for one year and ordered to re-qualify as a principal before serving in such capacity in the future.

FINRA found that as a result of the misconduct at least 184 customers suffered financial hardships, including market losses, a reduction in principal and the inability to sustain expected withdrawal rates. In many cases, the customer's initial investment was eroded by market declines and the customer's monthly withdrawals were not funded by income but were really distributions of principal. Some customers were forced to return to work at a greatly reduced income in order to meet their basic living expenses. FINRA has ordered Morgan Stanley to pay restitution to 90 former customers of Kazacos or Isabella who sustained losses. The firm has previously settled with 101 other customers of those brokers.

"Protecting investors who have retired or are considering retirement has been one of FINRA's top priorities," said Susan L. Merrill, Executive Vice President and Chief of Enforcement. "Brokerage firms and brokers who serve investors considering retirement must ensure that their customers are given suitable investment recommendations based upon reasonable assumptions of market performance and are given thorough disclosure of investment risks.
The supervisory failures of Morgan Stanley and its management led to losses suffered by customers at a vulnerable time in their lives - retirement - which could have been avoided."

Specifically, FINRA found that, from 1998 through 2003, Kazacos persuaded retirees and potential retirees to invest their retirement assets with him by representing that these investors would earn 10 percent returns each year and would be able to satisfy their income needs by withdrawing annually a similar percentage for living expenses without reducing their principal.
Kazacos' statements encouraged several individuals to move their retirement accounts to Morgan Stanley, with some deciding to retire sooner than they otherwise might have.

FINRA found that Kazacos told customers in their 50s that, even though they had not reached the minimum age for taking withdrawals from their qualified retirement accounts (59-and-a-half), they could begin taking systematic distributions from their accounts, without penalty, by relying upon Section
72(t) of the Internal Revenue Code. FINRA also found that Kazacos failed to inform these customers of the risks associated with his recommended investment strategies.

FINRA further found that, once Kazacos began servicing the retirement accounts - which were often the only source of income for the retirees - he implemented unsuitable investment strategies that exposed the accounts to greater risk, particularly in a declining market, and reduced the principal in many accounts. He invested many of the customers in mutual funds, with an unsuitably high concentration in equity funds. Kazacos also recommended unsuitable variable annuity transactions.

As to Isabella, a former Xerox employee, FINRA charged that from 2000 through 2003, he solicited many of that company's retirees and potential retirees to invest with him at Morgan Stanley. Isabella allegedly represented to prospective customers that, if they invested their retirement money with him, they would earn approximately 10 percent returns or more each year and be able to satisfy their income needs by withdrawing a consistent amount of money each year without reducing their principal.

FINRA found that Morgan Stanley failed to enforce a reasonable supervisory system to ensure that Kazacos and Isabella provided customers with appropriate risk disclosures concerning their retirement accounts. During the relevant time period, Kazacos and Isabella generated approximately $15.4 million in gross commissions. The firm knew or should have known that these representatives were actively marketing their early retirement programs to retirees and potential retirees. Nevertheless, the firm failed to take reasonable steps to ensure, among other things, that customers received proper risk disclosures and that Kazacos and Isabella did not promise or promote unrealistic investment returns. FINRA further found that Morgan Stanley also failed to ensure that the securities and accounts that those representatives recommended for the retirees, such as variable annuities and fee-based managed accounts, were properly reviewed for suitability and other concerns.

FINRA also found that Miller failed to take appropriate action to reasonably supervise Kazacos and Isabella to prevent their unsuitable investment recommendations and failures to disclose risks to many customers.

In settling these matters, Morgan Stanley, Kazacos and Miller neither admitted nor denied the findings, but consented to the entry of FINRA's findings.

If you were persuaded to take an early retirement from your employer based on advise and assurances from your investment advisor or insurance agent, you may have a claim for damages (negligent advice to retire). We are currently investigating and filing claims on behalf of numerous retirees who were given unsuitable and/or fraudulant advice regarding the investment of their retirment funds. Please contact our office for a free case evaluation. Thank you.

Labels: broker misconduct

According to a March 3, 2009 article in the Memphis Commercial Appeal newspaper, sportscaster Tim McCarver was awarded $100,000.00 by a FINRA arbitration panel for losses he experienced in the RMK Funds.

Mr. McCarver, a Memphis native invested $400,000 in four closed-end mutual funds and one open-end fund that managed and operated by Regions Morgan Keegan. Those funds suffered catastrophic losses, primarily related to the alleged over concentration on subprime mortgage polls and other collateralized debt obligations (CDOs).

Morgan Keegan & Co. of Memphis, whose Morgan Asset Management ran the funds until July when Hyperion Brookfield Asset Management took over seven funds in all, had a different perspective.

Of significance for future arbitration claims related to RMK losses, the arbitration panel turned down Morgan Keegan's request to have the expert testimony ruled misleading. Also, the attorney representing Mr. McCarver indicated this case was factually one of his weaker claims as McCarver was advised, at one point, to sell the fund shares by his Morgan Keegan broker, but declined to do so.

If you have lost money in one or more RMK mutual funds, please contact our office for a free case evaluation. Thank you.

Labels: broker misconduct

According to a recent article on Bloomberg.com, a Financial Industry Regulatory Authority (FINRA) arbitration panel has ordered Credit Suisse Group AG, Switzerland’s second-biggest bank, to pay more than $400 million to STMicroelectronics NV over claims the banking giant improperly sold the semiconductor maker auction-rate securities. The FINRA arbitration panel awarded the Claimant $400 milllion in damages plus an additional $6.5 million in attorney's fees.

Auction-rate securities (ARS) are long-term bonds or perpetual shares with interest rates adjusted periodically through a dealer-run bidding process. The market collapsed about a year ago when dealers withdrew support, leading to hundreds of failed auctions, higher borrowing costs for some issuers and leaving thousands of investors stuck with securities they couldn't’t sell.

In a series of August 2008 blogs, we reported when the U.S. Securities and Exchange Commission and state regulators forced several banks and brokerages, including Wachovia, Citibank and Merrill Lynch, to buy back more than $50 billion in auction-rate securities to settle claims that the firms falsely touted the investments as safe, cash-like investments. In September, 2008, Credit Suisse agreed to buy back about $550 million in securities from retail clients and pay a $15 million fine to resolve probes by state regulators.

If you hold auction rate securities or auctions rate preferreds, please contact our office to discuss your options for recovering your funds.

Labels: broker misconduct

The following is a excerpt from the December 1, 2008 article in the December issue of Structured Products Magazine. The article discusses the sale of Lehman Exchange Trades Notes (ETNs) as well as principal protected notes (PPNs).

Legal action spreads to losses on Lehman exchange-traded notes.

Arbitration's in the US have now expanded to recovering losses made as a result of investments in Lehman exchange-traded notes (ETNs). Around 20 law firms are now investigating the sale of principal-protected Lehman notes (PPNs) in the US, which have been left virtually worthless following Lehman's bankruptcy filing.

Florida law firm Colling Gilbert Wright & Carter is examining options for investors who have lost money in Lehman ETNs, and has already filed two arbitration cases regarding Lehman products with the Financial Industry Regulatory Authority. Several brokers, including UBS, are being investigated by lawyers on the basis that products they sold were misrepresented.

'With ETNs, regardless of what the play was, it was still unsecured Lehman debt and they didn't disclose that properly,' says William Young, a partner at the law firm. 'We are arguing that they knew Lehman was creating the products to support itself financially because they knew it was hemorrhaging money.' Under securities law, investors will be entitled to rescission, and in the state of Florida they are also entitled to attorneys' costs if material misrepresentation and omission is found to have taken place during the sale process.

UBS stands accused of a conflict of interest over its sale of Lehman notes, as it had approximately $300 million worth of exposure to the ailing bank (Structured Products, November 2008). However, UBS Wealth Management in the US has refuted the claim, and says it has 'already been in communication with clients outlining potential alternatives while the insolvency of Lehman continues to be worked out'. UBS says it properly sold these investments to its clients. 'The offering materials clearly identified Lehman as the issuer and discussed all the relevant risks and features of the product.' UBS clients hold approximately 1.7% of Lehman's reported structured notes and privately placed securities, according to the bank.

Aside from addressing the misrepresentation of product risk, PPN arbitration cases are also scrutinising the alleged neglect of a duty to diversify investor assets. 'It's a combination of oversold products and incompetence at financial adviser level,' says Chris Vernon, a partner at Florida law firm Vernon Healy. Vernon says some advisers put investors into a variety of Lehman notes linked to different indexes to diversify them across asset classes, with no attention to the massive concentration of credit risk in the portfolio. Under securities law, 'it is a breach of the standard of care not to diversify assets properly,' he says.

Most individuals have chosen to pursue arbitration claims against brokers, as the resolution, if successful, is likely to occur within 12 to 18 months. The bankruptcy settlement, however, is anticipated to take between five and 10 years to conclude, lawyers estimate, at which point investors may still receive little back.
Source: Structured Products
© Incisive Media Ltd. 2008

Colling, Gilbert, Wright & Carter is actively seeking and litigating claims for clients that purchased Lehman backed bonds and notes in late 2007 and 2008. If you purchased a Lehman structured product from your brokerage firm, please contact our office for a free case evaluation.

Labels: broker misconduct

The situation for Madoff investors gets worse. After the news broke that the $50 billion dollar investment fund was really a ponzi scheme, thousands of investors which include including wealthy individuals and institutions realized they have lost millions. Some have been wiped out by the scam. In related news, one of the fund managers committed suicide over the debacle.

Now, according to a December 24, 2008 Bloomberg news article A U.S. Bankruptcy Court yesterday upheld a plan by the liquidator of Bernard Madoff's investment fund to restrict individual compensation for victims of his alleged scam to $500,000, including $100,000 in cash. In essence most investors will literally get pennies on the dollar in compensation for their losses.

The bankruptcy court's decision to uphold a plan by Securities Investor Protection Corp. (SIPC) means that anyone trying to get additional compensation will have to file a separate lawsuit or join a class-action claim, according to an article in the NY Post said.

The bankruptcy court also upheld SIPC's plan to limit claims to investors who placed money with Madoff in the 12 months before his arrest on Dec. 11, the newspaper reported.

SIPC plans to start sending out claims forms to customers considered eligible for compensation, no later then January 9, 2009.

Labels: broker misconduct

According to a December 9, 2008 Reuters article, Regions Bank, part of Regions Financial Corp, on Monday launched a $3.5 billion, four-part debt sale that will be guaranteed by the Federal Deposit Insurance Corp.

The sale includes $1 billion in two-year fixed rate notes and $1.75 billion in three-year fixed rates notes. The Bank is also selling $250 million of 18-month floating rate notes and $500 million in two-year floating rate notes. Barclays Capital, Credit Suisse, Goldman Sachs and Morgan Keegan are co-managing the sale.

There is no word as to how much of Regions' cash crunch was caused by Regions' brokerage arm Morgan Keegan which is embroiled in litigation related to the RMK Bond and Income Funds.

If you have lost money related to the RMK Funds, please contact our office for a free case evaluation.

Labels: broker misconduct

Citigroup Inc. and UBS AG on Thursday December 11 agreed to buy back a total of nearly $30 billion in risky auction-rate securities regulators disclosed. The securities were originally marketed to the banks' customers as safe investments. The Securities and Exchange Commission has approved the agreement.

Tens of thousands of the banks' customers bought the auction-rate
securities before the $330 billion market for them froze in
mid-February, according to SEC officials. The new settlements were the largest return of customer money in the agency's history and all the investors will be made whole, SEC Chairman Christopher Cox said in a statement.

Neither Citigroup nor Switzerland's UBS admitted nor denied any wrongdoing
in the marketing and sale of the securities. Citigroup will be buying back roughly $7 billion in ARS's while UBS's repurchase exceeds $22 billion.

The banks came under fire from several state securities regulators including New York and Texas and agreed to buy back the frozen assets under threat of being blocked from doing future business in those states. The banks also agreed to pay civil fines as part of the deal reach with the SEC and state officials.

Following wide-scale investigations into the sales practices involving ARS's, the
regulators alleged the banks misled customers into believing that
auction-rate securities were safe, cash-like investments. The auction-rate securities market involves investors buying and selling instruments that resemble corporate debt, except the interest rates are reset at regular auctions, some as often as once a week. A number of companies invested in the securities because they could treat their holdings almost like cash.

Tens of thousands of investors nationwide - including cities and towns,
charities and small businesses - were left holding damaged securities
that couldn't be readily sold for cash once the market for auction-rate
securities dried up in February.

Settlements calling for buybacks of auction-rate securities also have
been reached with Bank of America Corp., RBC Capital Markets Corp.,
Morgan Stanley, JPMorgan Chase & Co., Wachovia Corp., Merrill Lynch &
Co., Goldman Sachs Group Inc., Deutsche Bank, Credit Suisse Group and
Wachovia Corp.

________________________________________________________________

Labels: broker misconduct

On Thursday December 4, a New York State Supreme Court justice dismissed a shareholder class action against The Bear Stearns Cos. Inc.’s officers and directors challenging its merger with JPMorgan Chase & Co. The class action lawsuit claimed the $10.00/share stock swap was inadequate and not in the best interest of shareholders. The suit sought damages from Bear Stearns directors for alleged “violations of fiduciary duties” and from JPMorgan for its “tortious conduct.”

State Supreme Court Justice Herman Cahn rejected the consolidated class action in a 44-page ruling, saying that the decision to merge was protected by the “business judgment rule,” meaning that the board of directors made an informed decision in what it believed was the best interest of the company and therefore were not liable.

The merger was brokered by the Federal Reserve to prevent a bankruptcy
at Bear Stearns, “an event with potentially cataclysmic consequences for the broader economy as well as for the shareholders,” wrote Justice Cahn.

Initially, JPMorgan agreed to purchase Bear Stearns shares for $2/share but an amended agreement increased the initial offer to $10/share when there was a significant backlash from shareholders and company officials. Of the Bear shareholders that took part in approval vote, approximately seventy-one percent voted to go forward with the takeover of Bear by JP Morgan Chase.

The fallout of this transaction had devastating effects on investors and employees of Bear. Many employees lost most of their 401K value and shareholder saw their stock value decline over 93% from a prior year high of $157/share.

The fall of Bear Stearns in March 2008 was only the first of many failures and mergers in the financial sector which has thrown the markets into turmoil and caused billions of dollars in investor losses.

Bear Stearns' financial situation started to unravel with the failure of two Bear hedge funds that took huge bets on supprime mortgage bonds. The two fund managers are currently under federal indictment after being arrested June 19, 2008 and charges with fraud.

Labels: broker misconduct

A controversial selling-away case decided by the Securities and Exchange Commission last month serves as a warning to brokers about getting entangled in an often vague and gray area of securities law.

And it serves as a reminder of the risks that financial advisers face from overly aggressive enforcers. The SEC last month threw out the case, which was brought by the Financial Industry Regulatory Authority Inc. (FINRA) of New York and Washington against two Dallas-based brokers for Paine Webber Inc. of New York.

In dismissing the case, the SEC chided FINRA enforcers for attempting a "novel interpretation" of FINRA's selling-away rule. FINRA, then known as NASD, charged the brokers in 2002. In the action, FINRA alleged the brokers engaged in a private securities transaction by soliciting clients to buy shares in e2 Communications Inc. of Dallas without the required prior notice and approval from their firm.

Both a Finra hearing panel and its National Adjudicatory Council upheld some of the charges.

But on appeal, the SEC said that "the record demonstrates that e2 itself solicited" the clients. "NASD points to no evidence that [the brokers] were involved in these ... purchases."

Although the brokers in this case were ultimately absolved of the charges, selling away occurs very frequently and investors need to understand their right and options for recovery should they be involved in one of these unauthorized and illegal transactions.

Selling away occurs when a broker recommends or solicits the purchase of a security that is not approved for sale by the broker's employing firm. Selling away cases often involve ponzi schemes, real estate partnerships and other forms of private investment.

As broker/dealers are responsible for supervising their agents, they may be responsible for any losses that occur from the unauthorized transactions. In other words, brokerage firms are typically liable for the conduct of their agents done during the course of their employment.

If you believe you have been sold an unauthorized investment that was not on your brokerage firm's recommended list, please contact our offices for a free consultation.

Labels: broker misconduct, selling away, unauthorized investment