Articles Posted in Bank of America

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Investment fraud lawyers continue to investigate claims on behalf of elderly individuals who have been the victims of affinity fraud. In many cases, it is up to the children and grandchildren of elderly individuals to discover and put a stop to the victimization of their loved ones by fraudsters.

Have Your Loved Ones Been the Victims of Affinity Fraud?

A recent article in Forbes examined why elderly parents are susceptible to scams that seem obvious to younger individuals. According to the article, there are three main reasons for this: isolation and loneliness, diminished cognition and feelings of financial insecurity. Fraudsters know how to talk to lonely elders in a way that garners trust and makes them feel engaged. In addition, Alzheimer’s Disease research indicates that the first kind of judgment to be impaired is financial judgment, which may go undetected in the beginning stages of Alzheimer’s.

In one example, Gary H. Lane, a former Bank of America financial advisor, pleaded guilty to five counts of tax evasion and 12 counts of fraud on September 3, 2013 and was sentenced to a 10-year prison sentence on February 10, 2014. Allegedly, Lane defrauded six investors of more than $2 million from January 2010 until March 2011. During that time, Lane was reportedly employed by Bank of America Investment Services. Allegedly, Lane convinced these clients to invest their money through an E-trade account instead of following normal bank procedures.

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Investors who suffered significant losses as a result of their auction-rate securities investment with Jeffries Group LLC may be able to obtain a recovery via FINRA securities arbitration. Jeffries Group is a subsidiary of Leucadia National Corp., another full-service brokerage firm. Recently, Jeffries was ordered to pay an investor $7 million regarding an auction-rate securities dispute.

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.

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Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses as the result of an unsuitable recommendation of floating-rate bank loan funds. Earlier this month, the Financial Industry Regulatory Authority announced that it ordered Banc of America and Wells Fargo to pay a fine and restitution for the improper and unsuitable recommendation and sale of floating-rate bank loan funds.

Investors Could Recover Losses for Unsuitable Recommendation of Floating-rate Bank Loan Funds

Wells Fargo Advisors LLC was ordered to pay a $1.25 million fine and restitution of approximately $2 million for losses sustained by 239 customers. As Banc of America’s successor, Merrill Lynch, Pierce, Fenner & Smith was ordered to pay a $900,000 fine and restitution of approximately $1.1 million for losses sustained by 214 customers.

Floating-rate bank loan funds can be illiquid and carry significant risks because they invest in loans to entities with below-investment-grade ratings. According to FINRA’s findings, Banc of America and Wells Fargo made recommendations of concentrated purchases of these investments to customers for whom the recommendation was unsuitable. Stock fraud lawyers say that most investors with conservative risk tolerances or who want to conserve principal should not have received a recommendation to invest in a floating-rate bank loan fund.

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Securities fraud attorneys are currently investigating potential claims on behalf of customers who suffered losses as a result in their investment in a Bank of America-created structured product or products. In some cases, Financial Industry Regulatory Authority-registered brokerage firms may be held liable for having improperly sold structured products to their clients, such as those created by Bank of America.

Investors of Bank of America Structured Products Could Recover Losses

Typically, structured products are notes or debt instruments created by investment sponsors. These products are linked to assets such as stock, which are linked to another asset or assets. These investments are extremely complex and, as a result, are not appropriate for unsophisticated investors who are not capable of understanding the risks and complexity of the investment.

Because an income component is typically offered with structured products, they are appealing to fixed income individuals, such as retirees. Despite the fact the investment is not suitable for many individuals, they continue to be pushed by brokerage firms because of the high commissions offered in association with their creation and sale. Financial Industry Regulatory Authority rules have established that firms 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 given their age, investment objectives and risk tolerance. Furthermore, securities arbitration lawyers say that brokerage firms must, before approving an investment’s sale to a customer, conduct a reasonable investigation of the securities and issuer.

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Investment attorneys turn their eyes to Bank of America once again, only two months into the New Year. Bank of America Corp. has been subpoenaed by William Gavin, the Massachusetts securities regulator, over LCM VII Ltd. and Bryn Mawr CLO II Ltd., two related collateralized loan obligations. These two CLOs led to investor losses totaling $150 million. The subpoena will, hopefully, help authorities in determining if Bank of America knew it was overvaluing the assets of the portfolios. Both Bryn Mawr and LCM were sold in 2007, prior to the 2008 merger between Bank of America Securities and Merrill Lynch.

News: Bank of America Faces More Allegations In 2012

Bank of America held commercial loans from small banks amounting to around $400 million in 2006. In 2007, securities packages were put together from these loans and then sold to investors. The subpoena arrives only one day after Bank of America, JP Morgan Chase & Co., Wells Fargo & Co., Citigroup Inc. and Ally Financial Inc. settled allegations of engaging in abusive mortgage practices. These abusive practices included engaging in deceptive practices in the offering of loan modifications, a failure to offer other options before closing on borrowers with federally insured mortgages, submitting improper documents to the bankruptcy court and robo-signing foreclosure documents without proper review of the paperwork.

The settlement amounted to $25 billion and involved federal agencies plus authorities in 49 states. This settlement is designed to give $2,000 to around 750 borrowers whose homes were foreclosed upon after the home values dropped 33 percent from their 2006 worth, and to provide mortgage relief. In addition, all five banks will pay $766.5 million in penalties to the Federal Reserve. This is considered to be the biggest federal-state settlement ever. Bank of America will also pay $1 billion to settle allegations that it, together with its Countrywide Financial unit, engaged in fraudulent and wrongful conduct.

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Investment attorneys are seeking Banc of America Securities customers who purchased Lyon Capital Management VII Collateralized Loan Obligations. Banc of America sold Lyon Capital to its institutional and high-net-worth customers. The CLOs were issued in July 2007. However, at this time, the value of investment, which was created by pooling loans together, was already declining. Lyon Capital’s value quickly declined and, eventually, was liquidated. The poor performance of Lyon Capital indicates that Banc of America either knew, or should have known, the existing market conditions made the deal a bad one. Investment attorneys are also questioning the valuation procedures that were used in pricing the loans.

Purchasers of Lyon Capital CLO with Banc of America Securities May Have Securities Arbitration Claim

A Financial Industry Regulatory Authority Arbitration Panel last week awarded $1.38 million to a Lyon Capital CLO investor. The award includes attorney’s fees, hearing session fees, interest and the entirety of the claimant’s investment losses. Allegations heard by the panel stated that Lyon Capital was worthless at the time of purchase. Only one month after closing the allegedly worthless deal, the disclosures about potential losses in similar loan pools was changed by Banc of America. August 2007’s prospectus stated that, because of the declining market values of loans, it was likely that “on the closing date [the value of the portfolio] will be substantially less than the principal amount.” The claimant further alleged that the investment was sold as a low-risk investment and Lyon Capital CLO was, in actuality, artificially inflated at the time of closing.

In light of the conduct of Banc of America in the sales of Lyon Capital and the recent related FINRA award, investment attorneys believe there may be other Lyon Capital investors who can seek to recover losses through securities arbitration. To find out more about your legal rights and options, contact an investment attorney at The Law Office of Christopher J. Gray at (866) 966-9598 for a no-cost, confidential consultation.

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Bobby Hayes, a Nevada retiree and wealthy investor, has been awarded $1.4 million in damages in securities arbitration against Merrill Lynch. According to Hayes’ allegations, Bank of America Corp.’s Merrill Lynch sold him collateralized debt obligations which were worthless at the time he purchased them.

After Securities Arbitration, Merrill Lynch Must Pay $1.4 Million to Investor Over CDO Loss

The case was filed in 2011, and Hayes’ allegations included consumer fraud and breach of contract, among other misdeeds. The collateralized debt obligations, or CDOs, were purchased in 2008 from former Bank of America Securities LLC, which is now part of Merrill Lynch. The Financial Industry Regulatory Authority’s (FINRA) ruling, dated for January 31, 2012, was in favor of the claimant.

CDOs are securities that are backed by underlying pools of loans or bonds. While these investments are inherently risky, they are relatively common among qualified investors.” However, Hayes was unaware of the fact that at the time of purchase, the securities were already under water. The loans backing the securities were purchased by Merrill between November 2006 and June 2007. According to Hayes’ allegations, while in the company’s inventory, the securities lost a significant amount of their value. Regardless, Merrill sold the loans to investors like Hayes for the purchase price rather than what they were worth.

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A recent securities arbitration proceeding regarding Weyerhaeuser stock has investors seeking representation for potential claims. According to the recent claim, which was filed with the Financial Industry Regulatory Authority, a retiree who held a concentrated position in Weyerhaeuser stock sustained $200,000 in damages. The claimant inherited the stock upon the passing of his mother; he then sought investment advice from Merrill Lynch.

Potential Loss Recovery for Weyerhaeuser Stockholders

Allegedly, despite the risk management strategies available to them — such as stop loss orders, exchange funds, a collar and/or protective put options —Merrill Lynch failed to protect some or all of the concentrated Weyerhaeuser stock positions under its advisement. Protective Puts allow the investor to create, at the put’s strike price, a price floor. This allows the investor to participate in the stock’s appreciation, customize the maturity of the put and stripe price, while providing downside protection. A collar, on the other hand, simultaneously Sells a call and purchases a put so that the proceeds and cost of the call and the put offset one another, which allows for hedging without requiring out-of-pocket expenses.

In addition to the company’s failure to utilize risk management strategies, Merrill Lynch failed to explain the risks associated with the holding of a concentrated stock position to clients. Merrill Lynch had a duty to protect the investment but failed to do so. This arbitration claim is still pending, but others who sustained losses as a result of the same mishandling of funds also are encouraged to seek the recovery of their losses through securities arbitration.

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The Federal Housing Finance Agency (FHFA), acting as conservator for Fannie Mae and Freddie Mac, has filed securities lawsuits against a total of 17 financial entities in both federal and state courts. States in which the lawsuits were filed are New York and Connecticut. Financial institutions affected by the lawsuits, which were filed in September 2011, include Bank of America, Credit Suisse, Citigroup, Countrywide, Goldman Sachs, JPMorgan Chase, Merrill Lynch, Morgan Stanley and Deutsche Bank. These institutions, along with 8 others, violated federal securities and common laws when selling mortgage-backed securities. This is not the first time many of these financial institutions have been charged with securities fraud, and investment attorneys are doubtful that it will be the last.

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.

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Investors who purchased MF Global Notes should consider securities arbitration against the underwriter broker-dealer from whom they purchased the Notes as a way of possibly recovering their losses.

Notice to MF Global Noteholders

Though it is unsure when and how much MF Global noteholders will receive from the firm’s bankruptcy, Fitch Ratings stated in early November that the amount received by owners of MF Global’s senior unsecured debt could be as low as 10 percent of their investment. Fitch Ratings estimates the maximum investors will receive at only 30 percent. Investors who purchased MF Global 1.875 percent Convertible Senior Notes due in 2016, MF Global 3.375 percent Convertible Senior Notes due in 2018 and Global 6.250 percent Senior Notes due in 2016 may have a valid claim against the underwriters of these Notes. Jefferies, Bank of America, Merrill Lynch, Lebenthal & Col, Sandler O’Neill + Panthers, BMO Capital Markets, US Bancorp, Commerzbank and Natixis are some of the underwriters of MF Global Notes.

It is possible that the underwriters of MF Global Notes knew or should have known more about MF Global’s financial problems and may not have adequately disclosed material information in the Notes’ prospectuses. Reports that the prospectuses may have been misleading have led to an investigation.

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