Massachusetts Fines State Street Corp over Carina CDO
According to reports, the Massachusetts Secretary of State has fined a unit of State Street Corp. $5 million for its role in a mortgage-backed debt obligation.
Continue ReadingJustice Dept. and SEC Investigate Oppenheimer For Overvaluing Private Equity Fund To Boost Sales To United States Investors
According to the Wall Street Journal, Oppenheimer and one of its units may have overstated the value of one of its private equity funds at a time when it was promoting the fund to investors in the fall of 2009. It represented that the fund had a 38 percent internal rate of return when it had actually produced a loss of 6.3 percent. After reporting the inflated performance to investors, the fund raised over $55 million from individuals and institutions. Oppenheimer reported the investigation in its Form 10-K filed on March 6, according to the article. The private equity fund (not identified in the article) was operated by Oppenheimer Holdings Inc. “This is not only bad press but a situation where criminal and civil liability is a certainty, if true,” says Robert Wayne Pearce, a Florida-based securities attorney.
Continue ReadingFINRA Fines Merrill Lynch $2.8 Million for Overcharging Customers
The Financial Industry Regulatory Authority (FINRA) has fined Merrill Lynch $2.8 million for overcharging nearly 95,000 customers with fees totaling more than $32 million. The overcharges occurred from April 2003 to December 2011. The fine also included failing to provide timely trade confirmations (“Merrill Lynch Fined for Overcharging Customers,” Wall Street Journal).
Continue ReadingCan I Recover My MAT (Municipal Arbitrage) Fund Losses?
The MAT funds were so-called municipal arbitrage bond funds created by Citigroup Alternative Investments and marketed by Smith Barney Financial Advisors to their best customers. It was called an “arbitrage” fund and many investors were misled into believing that it was relatively risk free, a safe or conservative investment fund. But it was nothing of the sort. It was a highly leveraged and speculative structured credit product that many believe to have been misrepresented and mismanaged.
Continue ReadingFINRA Fines Wells Fargo $2 Million for Reverse Convertible Sales to Seniors
The Financial Regulatory Industry Authority (FINRA) has charge former Wells Fargo registered representative Alfred Chi Chen for recommending and selling reverse convertibles and making unauthorized trades in deceased customer accounts. The reverse convertible sales involved 21 customers and 172 accounts. 71% account holders were over 80 years old, and more than half of the accounts had between 50 and 90% of capital in reverse convertibles. Mr. Chen generated $1 million in commission from the sales, which contributed to investors’ losses. As a result, FINRA fined Wells Fargo $2 million and ordered that customers receive restitution for unsuitable sales of reverse convertibles and other misconduct, which Wells Fargo ultimately consented to.
Continue ReadingSEC Fines Oppenheimer $35 Million for Misrepresenting Bond Funds
The SEC fined Oppenheimer Funds more than $35 million to settle SEC charges the investment management company and its sales and distribution arm made misleading statements about The Oppenheimer Champion Fund and The Oppenheimer Core Fund. The Oppenheimer Champion Income Fund lost 78 percent in 2008, which is 52 percent more than the average junk bond fund. The Oppenheimer Core Bond Fund lost 36 percent in 2008 compared with a 5 percent loss for the average intermediate term bond fund.
Continue ReadingFINRA and RBC Wealth Management Unit Ferris, Baker Watts Settle Charges Regarding Reverse Convertibles
The Financial Regulatory Industry Authority (FINRA) and RBC Wealth Management have agreed to settle charges related to sales of reverse convertibles by Ferris, Baker Watts to elderly clients. The brokerage firm will pay $190,000.00 in restitution to 57 account holders, many of who are older than 85 years old, for losses incurred. On example cited by FINRA is the sale of five reverse convertibles in the amount of $10,000.00 each to an 86-year-old, which comprised between 15 and 25% of her portfolio. According to FINRA’s report, close to 2,000 retail investors were sold reverse convertibles between January 2006 and July 2008. FINRA alleged that Ferris, Baker Watts failed to properly supervise and guide managers and brokers on determining whether the product was suitable for clients. In addition, the firm was accused of not establishing a system that could monitor, find, and correct reverse convertible over-concentrations.
Continue ReadingThe SEC Charges Former JP Turner Company Broker Ralph Calabro for Churning Client Accounts
The Securities and Exchange Commission (SEC) has charged former JP Turner and Company broker Ralph Calabro for churning client accounts with conservative investment objectives. Mr. Calabro’s churning activity caused severe losses for clients, while he collected hefty fees. He served as a registered representative of the Parlin, NJ branch office from March 2004 until January 2007, and he is currently a registered representative at National Securities Corp.
Continue ReadingThe SEC Charges JP Turner and Company along with Management and Three Brokers for Churning
The Securities and Exchange Commission (SEC) has charged JP Turner and Company along with its head supervisor and president for compliance failures related to churning. Three former brokers were also charged for churning client accounts with conservative investment objectives, causing severe losses while the brokers collected hefty fees. JP Turner and the company’s president, William Mello, have agreed to settle the SEC charges, while an administrative proceeding continues against the three brokers.
Continue ReadingH&R Block Financial Advisors (Ameriprise Advisor Services) Fined by FINRA for Reverse Convertible Sales
H&R Block Financial Advisors, now Ameriprise Advisory Services, has been fined $200,000.00 by the Financial Regulatory Industry Authority (FINRA) for failing to establish a proper supervisory system to monitor reverse convertible note sales to clients. FINRA said that between January 2004 and December 2007, H&R Block sold reverse convertibles to clients without keeping an eye on possible over-concentrations of reverse convertibles in clients’ accounts. FINRA added that H&R Block did monitor unsuitable investments through an automated surveillance system, but no system was in place to keep track of reverse convertible transactions, which caused them to miss signs of perilous levels of reverse convertibles in client accounts. Moreover, FINRA said that the firm had failed to provide guidance to its supervisors concerning suitability as it relates to their agents’ recommendations of reverse convertibles to clients.
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