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.

The claim, which originally requested $4.3 million in relief, was filed in 2010 by Lawrence B. Dale, an investor in the Intermediate Fund. The award stated that Morgan Keegan allegedly “represented to the claimants that the (bond fund) was a safe and conservative investment.” Further allegations by Dale were that the Intermediate Fund “did not match Morgan Keegan’s misrepresentations, failed to disclose material information, misrepresented values, and invested in structured finance and asset-backed securities” that were unsuitable for Dale. The firm also allegedly failed to adequately supervise its employees, according to Dale.

Securities arbitration lawyers say that Morgan Keegan and Regions Financial have been facing many problems because of the Intermediate Fund and its blowup during the financial crisis. This fund was one of a group that saw a significant decline in net asset value in 2007 and 2008, reportedly between 60 and 80 percent. Furthermore, the firm was later charged by regulators with overstating the value of the funds’ mortgage-backed securities. The firm agreed to pay a fine to regulators amounting to $200 million in 2011. In addition, a civil complaint was filed by the Securities and Exchange Commission against the funds’ former board members in December. According to this complaint, the board members allegedly failed to properly oversee the managers of the fund.

According to stock fraud lawyers, prior to recommending an investment to a client, brokers and firms are required to perform the necessary due diligence to establish whether the investment is suitable for the client, given their age, investment objectives and risk tolerance. If, like Dale, you were recommended Morgan Keen proprietary bond funds despite the fact that they were unsuitable for you, you may have a valid securities arbitration claim. 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.

Morgan Keegan’s office based in Memphis, Tennessee, was accused of securities fraud and sued by the SEC in 2009. According to securities fraud attorneys, the SEC alleged that from late 2007 through the ARS market collapse in February 2008, Morgan Keegan brokers told customers the auction-rate securities “were as good as cash” in an effort to increase sales.

Stock fraud lawyers know that 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 severely affected the market. As a result, many investors were left with securities that couldn’t be sold.

Typically consisting of preferred shares and municipal- and student loan-backed bonds, the market for these investments collapsed after dealers refrained from taking part in auctions at which interest rates were regularly reset at intervals of every 7, 28 or 35 days. This information is notwithstanding the alleged omissions and misrepresentations.

The acquisition of Morgan Keegan was recently completed by Raymond James Financial Inc. from Regions Financial Corp. This case can be referenced as SEC v. Morgan Keegan & Co. Inc, 11-13992, U.S. Court of Appeals for the Eleventh Circuit. Now that the case has been reinstated, securities fraud attorneys are watching for further developments.

If you believe you have been the victim of auction-rate securities fraud, find out more about your legal rights and options by contacting a securities fraud attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

Securities fraud attorneys say that leveraged and inverse ETFs amplify short-term returns. They do so by using derivatives and debt. These investments are more suitable for professional traders and are usually unsuitable for long-term retail investors. These investments only make up $29.3 billion of the $1.15 trillion United States ETF market. FINRA has raised concerns that these products are being sold to long-term retail investors, despite the risk involved when holding leveraged and inverse ETFs for more than one day.

“We don’t have a qualm with the product,” Bennett says. “We just want to make sure that people who are selling them understand them.”

Bennett opted not to name the firms involved in the upcoming enforcement cases. While leveraged and inverse ETFs have been investigated for years by FINRA and the SEC, there has been little enforcement action in the past. A Massachusetts securities regulator sued RBC Capital Markets LLC for selling leveraged ETFs to investors who did not properly understand them in July 2011. In addition, FINRA barred a former Morgan Keegan & Co. broker in March for making inappropriate and excessive trades in leveraged and inverse ETFs on behalf of clients.

Securities fraud attorneys say FINRA is also looking into the marketing and selling practices of firms who sell exchange-traded notes as a result of the significant loss of value of the VelocityShares Daily 2x Short-Term ETN, which was managed by Credit Suisse.

If you have suffered losses as a result of your investments in ETFs, you may have a valid securities arbitration claim. To find out more about your legal rights and options, contact an investment fraud lawyer at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.