Archive for the “stockbroker misconduct” Category

Changes are coming to BrokerCheck, the online tool managed by the Financial Industry Regulatory Authority (FINRA) that documents investor complaints and other information about stockbrokers, financial representatives and brokerage firms.

Among the changes planned: increasing the number of customer complaints reported publicly; posting certain information about brokers on a permanent basis; and extending the public disclosure period from two years to 10 years for all brokers who leave the industry.

“The greater amount of information that is available to the investing public will only provide the opportunity for investors to be better informed as to the investment professionals they are entrusting their assets to,” said Steven Caruso of Maddox Hargett & Caruso, P.C., in a July 14 phone interview with On Wall Street.

As part of the changes, FINRA also will formalize a dispute process for current or former brokers to dispute the accuracy of, or update, factual information disclosed through BrokerCheck.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

The Financial Industry Regulatory Authority (FINRA) nearly doubled its fines and disciplinary actions in 2009 against brokerages and financial advisors. As reported in FINRA’s recently released report, 2009 in Review, FINRA fined firms and individuals approximately $50 million in 2009, almost twice as much as in 2008.

In addition, FINRA resolved more disciplinary actions in 2009 (1,090) versus 2008 (1,007), but fewer than what were resolved in previous years - 1,344 in 2005; 1,147 in 2006; and 1,107 in 2007.

The top enforcement issues in 2009 concerned mutual funds, which produced fines totaling about $12 million. More than one-half of the mutual fund cases included allegations involving suitability issues.

Suitability cases also ranked high in FINRA’s report, with total fines reaching $11.9 million. Variable investment cases generated approximately $6.45 million in fines and/or actions.

Another finding in FINRA’s report concerns fines of $1 million or more. In 2009, FINRA imposed 10 such fines versus three in 2008.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

The verdict for Eric Butler is five years in prison for fraudulently selling risky auction-rate securities that ended up costing investors more than $1.1 billion in losses. The ex-Credit Suisse broker also was fined $5 million.

Butler was convicted of securities fraud and conspiracy to commit securities fraud back in August. At the time, prosecutors were seeking a 15-year prison sentence.

One month earlier, Butler’s partner - Julian Tzolov - pleaded guilty to fraud, conspiracy charges and bail-jumping after previously fleeing the country. His sentencing is set for April 27, 2010.

Prosecutors in the case accused Butler and Tzolov of trying to take in bigger commissions by convincing clients they were investing in safe, conservative securities backed by federally guaranteed student loans. The scheme began to backfire in the fall of 2007 as auctions for the investments started to fail.

Institutional investors in particular suffered millions of dollars in losses as a result of the former brokers’ actions. Among the companies affected: STMicroelectronics NV (which later sued Credit Suisse and was awarded $406 million by the Financial Industry Regulatory Authority), Potash Corp of Saskatchewan Inc. and Roche Holding AG.

The case against Butler marks one of the first criminal prosecutions related to the credit crisis.

In the future, investors may be the benefactors of a welcome shot in the arm thanks to recently introduced legislation that would make it easier for them to sue accountants, marginal financial players, investment banks and other entities that act as accomplices of securities and investment fraud. The measure, which was unveiled July 30 on the Senate floor by Sen. Arlen Specter, could significantly change recent Supreme Court limits on such cases.

“It would be an appropriate change,” said Donald Langevoort, a securities law professor at Georgetown University, in an Aug 4 article by Bloomberg. “Secondary actors who play a big enough role in perpetrating a fraud should bear responsibility just like anyone else and shouldn’t be able to hide.” 

“There’s a lot of investor anger, especially against major players on Wall Street, and aiding and abetting liability taps right into that,” Langevoort said in the story.

If passed, the bill would reverse the Supreme Court’s 2007 decision in Stoneridge Investment Partners LLC v. Scientific-Atlanta Inc. In that case, the Supreme Court ruled in a 5-3 vote that shareholders could not sue third parties that “assisted” in a fraud committed by the company whose stock they own.

That ruling ultimately left many investors with no legal recourse, while at the same time essentially giving selected individuals a free pass to commit fraud.

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.

Securities fraud, corrupt brokerage firms and stockbroker misconduct have become a permanent fixture in news headlines recently. What follows is a summary of an article that first appeared in BusinessWeek on March 11, 2009, about the most celebrated financial frauds and scandals in U.S. history.

Interestingly, more than half of the alleged frauds featured in the story occurred in 2008 and 2009.

• Bernard Madoff

Estimated losses to investors: $65 billion 

• Charles Ponzi

Estimated losses to investors: $20 million

• R. Allen Stanford

Estimated losses to investors: $8 billion

• Jerome Kerviel

Estimated losses to investors: $8 billion

• Ralph Cioffi and Matthew Tannin

Estimated losses to investors: $1.6 billion

• Edward Strafaci

Estimated losses to investors: $350 million

• Tom Petters

Estimated losses to investors: $1 billion

• Kazutsugi Nami

Estimated losses to investors: $1.4 billion 

• Nick Leeson

Estimated losses to investors: $1.4 billion

• Paul Greenwood and Stephen Walsh

Estimated losses to investors: $554 million

• Michael Berger

Estimated losses to investors: $393 million

• Nicholas Cosmo

Estimated losses to investors: $380 million

• Samuel Israel III

Estimated losses to investors: $350 million 

Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.