In May 2012, a statement of claim was filed with the Financial Industry Regulatory Authority by Saddlebag LLC. The claim alleges that the firm wrongfully invested the client’s assets in illiquid auction-rate securities (ARS). According to securities lawyers, many financial firms sold auction-rate securities as short-term instruments with a highly-liquid nature, much like money market funds.

However, in 2008, the credit crunch resulted in a failure of the ARS market and investors with a piece of the $330 billion market were stuck holding securities that they were unable to sell. Other firms, including Morgan Keegan, have been accused of misleading investors regarding the liquidity risk of auction-rate securities.

Auction-rate securities are tax-exempt, long-term and taxable bonds and their interest rates are connected to the short-term market. Through ARS, issuers can acquire lower short-term rates on long-term financing. Auction-rate securities were marketed as liquid cash alternatives and considered safe before the global credit crunch.

Firms and their registered representatives have an obligation to fully disclose all the risks of a given investment when making recommendations, and those recommendations must be suitable for the individual investor receiving the recommendation. According to Thompson Reuters, leading auction-rate securities underwriters included Bank of America, Citigroup, Goldman Sachs, UBS, Lehman Brothers, Morgan Stanley, JPMorgan, Merrill, RBC and Wachovia.

If illiquid investments were unsuitable for you given your age, investment objectives and risk tolerance and you suffered significant losses in the auction-rate securities market, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact a stock fraud lawyer at Law Office of Christopher J. Gray, P.C. at (866) 966-9598 or by e-mail at newcases@investorlawyers.net for a no-cost, confidential consultation.

In one case, the investors’ trust interviewed multiple money managers and investment firms including Credit Sussie, CitiGroup, Deutsche Bank, LaSalle Bank and Goldman Sachs. All of these firms recommended diversification across traditional asset classes, such as bonds and equities, as well as selective investments in alternative products for special situations.

However, the claim asserts that GenSpring stood out because of its unique approach which would provide better downside protection and better returns through the use of Multi-Strategy Hedge Funds, such as Silver Creek Funds, instead of the bond or fixed income portion of client portfolios. Allegedly, GenSpring officials claimed that their approach, which had been tested thoroughly, would behave like traditional bonds in terms of asset class correlation and volatility while providing returns across all market cycles that were superior to traditional bonds. The trust invested approximately $10 million and stated its primary goal as capital preservation.

In another case, trustees stated that they would need access to the funds within 6 to 18 months for business opportunities and, thus, needed safe, liquid investments. They invested $25 million with GenSpring, using primarily Multi-Strategy Hedge Funds.

In both cases, the Multi-Strategy Hedge Fund investments plummeted with the stock market in late 2008 and early 2009. Traditional bonds, however, rose more than 5 percent. According to stock fraud lawyers, the firm’s clients are at a continued risk of liquidity damage because they are unable to liquidate their very large investments.

Securities fraud attorneys say that there was no reasonable basis for GenSpring to believe that the Multi-Strategy Hedge Funds would provide adequate diversification or perform like bonds.

If you are an ultra-high-net-worth investor who suffered significant losses because of GenSpring’s recommendation of Multi-Strategy Hedge Funds, you may be able to recover your losses through securities arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at Law Office of Christopher J. Gray., P.C. at (866) 966-9598 for a no-cost, confidential consultation.

Securities arbitration lawyers say this situation is similar in some ways to what happened when, after Lehman declared bankruptcy, Series 2008A of Main Street Natural Gas Inc. Gas Project Revenue Bonds were downgraded. In the case of the Lehman bonds, the bonds were not guaranteed by Lehman Brothers, though certain payment obligations of the gas supplier were guaranteed.

The following is a list of gas prepayment bonds that have been affected by downgrades:

• Tennessee Energy Acquisition Corporation Gas Project Revenue Bonds, Series 2006A
• Public Energy Authority of Kentucky Inc. Variable Rate Gas Supply Revenue bonds, Series 2006A
• New Mexico Municipal Energy Acquisition Authority Gas Supply Variable Rate Revenue Bonds, Series 2009
• American Municipal Power Inc., OH Electricity Purchase Revenue Bonds, 2007A
• Lancaster Port Authority Gas Supply Variable Rate Revenue Bonds, Series 2008
• Salt Verde Financial Corporation, AZ Senior Gas Revenue Bonds, 2007
• Central Plains Energy Project Gas Project Variable Rate Revenue Bonds (Project No. 2), Series 2009
• Main Street Natural Gas Inc. Gas Project Variable Rate Revenue Bonds, Series 2010
• Texas Municipal Gas Acquisition & Supply Corporation II Gas Supply Revenue Bonds, Series 2007A & 2007B
• California Statewide Communities Development Authority Gas Supply Revenue Bonds, Series 2010
• Municipal Energy Acquisition Corp. Gas Revenue Bonds, Series 2006A & 2006B
• Indiana Bond Bank Gas Revenue Bonds, 2007
• Northern California Gas Authority No. 1 Gas Project Revenue Bonds, Series 2007A & 2007B
• Main Street Natural Gas Inc. Gas Project Revenue Bonds, Series 2006A & 2006B
• Roseville Natural Gas Financing Authority, CA Gas Prepayment Revenue Bonds, Series 2007A
• Public Authority for Colorado Energy Natural Gas Purchase Revenue Bonds, Series 2008
• Main Street Natural Gas Inc. Gas Project Revenue Bonds, Series 2007A
• Long Beach Bond Finance Authority Natural Gas Purchase Revenue Bonds, Series 2007A & 2007B
• Natural Gas Acquisition Corporation of the City of Clarksville, TN Gas Revenue Bonds, Series 2006
• Texas Municipal Gas Acquisition & Supply Corporation I, Gas Supply Revenue Bonds, Series 2006A & 2006B
• Texas Municipal Gas Acquisition & Supply Corporation I, Gas Supply Revenue Bonds, Series 2008D
• Black Belt Energy Gas District Gas Project Revenue Bonds, Series 2012A
• Central Plains Energy Project Gas Project Revenue Bonds (Project No. 3), Series 2012

According to stock fraud lawyers, the profitability and yield of investor holdings may be impacted by the downgrades placed on these investments. Furthermore, if the gas supplier guarantor’s credit risk was not disclosed, or if the bonds were recommended as “safe,” investors may be able to recover losses through securities arbitration. To find out more about your legal rights and options, contact a securities arbitration lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Goldman established “trading huddles” as a business process in 2006, according to FINRA’s statement. These “trading huddles” were designed to allow weekly meetings for research analysts, in which they would share trading ideas with traders for the firm. These traders worked with clients and, occasionally, equity salespersons. In addition, analysts apparently discussed specific securities while they were considering changing the conviction list status or published research rating of the security. Clients had access to the “trading huddle” information and were not restricted from direct participation through calls placed by analysts to high priority clients of the firm.

Unsurprising to investment fraud lawyers, a significant risk was created by trading huddles: material non-public information could be disclosed by analysts. Such information includes conviction list status and rating changes. Despite this risk, Goldman failed to have adequate controls to monitor communications before and after the trading huddles. Furthermore, an adequate monitoring system was not in place to detect possible trading in advance of conviction list and research rating changes in proprietary or employee training, institutional customer or client-facilitation and market-making accounts. Had these practices been allowed to continue, insider trading could have resulted, according to securities fraud attorneys.

While Goldman did not admit or deny the charges, it consented to the findings of FINRA and the SEC. Furthermore, the firm admitted to certain facts related to a previous settlement with the State of Massachusetts.

If you believe you have been the victim of fraud and would like to discuss your options, contact a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Underwriters named in the lawsuit include BNY Mellon Capital, Barclays, Citigroup, Merrill Lynch, Goldman Sachs, UBS and Morgan Stanley. Under Section 11 and Section 12(a)(2) of the Securities Act of 1933, underwriters of public offerings may be held liable if they fail to conduct a due diligence investigation of the information provided in prospectuses and registration statements.

The class action lawsuit states that, “The Underwriter Defendants underwrote BNY Mellon’s May 11, 2009 and/or June 3, 2010 common stock offering which were conducted pursuant to materially false and misleading offering materials and are charged with violations of the Securities Act in their capacity as underwriters for such offering.” Furthermore, allegations of the class action state that “throughout the Class Period, defendants concealed and failed to disclose material adverse facts about the Company’s financial well-being, business relationships, and prospects,” and goes on to claim that as a result of the wrongful acts and omissions of the defendants, combined with the “precipitous decline” of the common stocks’ market value that resulted from the disclosure of a FX trading scheme, investors suffered damages.

If you incurred losses as a result of BNY Mellon stocks related to this case, contact a stock fraud lawyer immediately to find out more about your legal rights and options. Contact The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

The FHFA is seeking civil penalties as well as damages. Allegedly, the financial institutions violated fiduciary duty by providing misleading loan descriptions as a part of their sales and marketing materials. The marketing materials did not reveal the true risk factors associated with the loans. According to the FHFA’s press release, “Based on our review, FHFA alleges that the loans had different and more risky characteristics than the descriptions contained in the marketing and sales materials provided to the Enterprises for those securities.”

Congress and regulators have put forth a continuing effort to deal with the practices of institutions that led to the financial crisis of 2008 and this lawsuit is part of that goal. It is similar to the one filed on July 27, 2011 against UBS Americas Inc. The Housing and Economic Recovery Act of 2008 gives the FHFA the authority to file complaints such as this one.

As conservator of Freddie Mac and Fannie Mae, the FHFA is responsible for preserving the assets of these companies, but if — as an individual investor — you have suffered investment losses that you believe to be the result of misleading marketing materials or a breach of fiduciary duty, find out more about your legal rights and options by contacting an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Citigroup is the third major bank to settle with the SEC for failing to disclose betting against a collateralized debt obligation, or CDO, and then marketing it to customers. JPMorgan settled for $153.6 million in June and Goldman Sachs settled for $550 million in July 2010.

In November 2007, the CDO defaulted and, while investors faced losses, Citigroup made $160 million. This contributed to the 2007-2009 financial crisis and is, therefore, a part of the mission to reduce broker fraud and hold Wall Street figures accountable for triggering the recession. According to the SEC, the Citigroup employee who was primarily responsible for structuring the transaction was Brian Stoker. In response to the files charged against him by the SEC, one of his lawyers said the allegations had “no basis.”

Credit Suisse Group AG, the collateral manager of the CDO, as well as Samir Bhatt, Credit Suisse’s portfolio manager who was primarily responsible, have settled separate charges with the SEC. Bhatt is suspended for associating with an investment advisor for six months and Suisse will pay $2.5 million. Citigroup represented Credit Sussie in marketing materials outlining the deal, according to the SEC.

Citigroup will forfeit $160 million in “alleged improper fees and profits,” $30 million in interest and will also pay a fine of $95 million. The settlement, according to Citigroup, “resolves all outstanding SEC inquiries into those activities.” Citigroup neither admitted nor denied wrongdoing.

According to Investopedia, an asset-backed security is “a financial security backed by a loan, lease or receivables against assets other than real estate and mortgage-backed securities. For investors, asset-backed securities are an alternate to investing in corporate debt.” While an alternate to corporate debt investment can be appealing to investors, asset-backed securities are not without their risks.

On September 19, a 4-0 vote by SEC commissioners passed the decision to seek comment on a Dodd-Frank Act-required rule. The clarification of this rule would “restrict those who package or sponsor asset-backed securities from engaging in deals that put their interests in conflict with buyers for a year after the first closing of a sale,” according to Bloomberg Businessweek.

Last year, Goldman Sachs paid $550 million to settle SEC claims having to do with how it marketed collateralized debt obligations related to subprime mortgages. After being accused of failing to disclose that the securities Goldman Sachs had created and sold were also picked by hedge fund Paulson & Co. — who had then bet against the ABS — Goldman Sachs acknowledged that it provided “incomplete information” and made a mistake with its marketing materials.

The rule will undergo a 90-day comment period and its final adoption is scheduled for between January and June of 2012.

If you believe you may have invested in an asset-backed security that was subject to a bet that caused a conflict of interest, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.