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Articles Posted in Merrill Lynch

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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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Investment fraud lawyers are currently investigating claims on behalf of employees of the United Parcel Service, better known as UPS, some of whom allegedly suffered significant losses as a result of the recommendation of financial advisers to maintain a leveraged, concentrated position in UPS stock. Through UPS’s Managers Incentive Program, many UPS employees received company stock.  Some employees then transferred the stock to full-service brokerage firms.

UPS Employees Could Recover Merrill Lynch Investment Losses

In many cases, the company stock was used as collateral for a “hypo loan,” which is obtained through the pledging of the securities to secure a loan. However, full-service brokerage firms may not have informed UPS employees of the risks associated with this type of loan. Those employees suffered significant losses from October 2008 through April 2009 when the value of UPS stock declined and they liquidated their investment.

One of the risks of maintaining a hypo loan is that of a margin call, which can result in a forced liquidation. As a result, the investor is not able to recover losses when or if the price of the stock rebounds. In the case of many UPS employees, securities arbitration lawyers say some of their losses could have been recovered as the company’s stock value rose since 2009.  However, due to the hypo loans some employees were forced to liquidate their UPS stock and therefore did not benefit from the subsequent recovery in UPS’s share price.

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Investment fraud lawyers are currently investigating claims on behalf of customers of the Phil Scott Group and Merrill Lynch regarding the unsuitable recommendation of investments. Walter Schlaepfer, also known as Phil Scott, and the Phil Scott Group reportedly worked out of the Merrill Lynch branch office in Bellevue, Washington.

At least six customer complaints have been filed against Scott since 2008, according to the Phil Scott Group’s securities license. All of these complaints allege that Scott made misrepresentations and/or unsuitable recommendations of investments.

Financial Industry Regulatory Authority rules have established that brokers and 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, brokerage firms must, before approving an investment’s sale to a customer, conduct a reasonable investigation of the securities and issuer. In addition, securities arbitration lawyers say firms like Merrill Lynch have a duty to properly supervise their brokers and can be held liable for broker misconduct if they fail to do so.

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Securities fraud attorneys are currently investigating claims on behalf of the customers of Gregory John Campbell, a former advisor for Merrill Lynch and LPL Financial. A Petition for Order to Cease and Desist, which was related to Greg Campbell of Ladue, Missouri, was recently issued by the State of Missouri.

Merrill Lynch, LPL Financial Could be Held Responsible for Advisor’s Investor Fraud

Missouri stated that “from 2008 to 2012, Respondent Greg John Campbell made unauthorized transfers in excess of $1,500,000 from at least five client accounts. A majority of the transferred funds from these client accounts were used for Campbell’s benefit.” According to Missouri, a portion of the funds went to payments on a BMW lease and two of Campbell’s properties.

Campbell’s activity reportedly went undetected because clients stopped receiving account statements from LPL Financial and Merrill Lynch. The addresses used by the firms for mailing account statements were changed without authorization from the clients. When questioned about the changes in address, Campbell reportedly stated that “they were the result of administrative errors.”

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Securities fraud attorneys are currently investigating claims on behalf of investors with full-service brokerage firms who suffered significant losses as a result of their investment in Paulson & Co.’s Advantage and Advantage Plus hedge funds. Reportedly, the Advantage Fund’s value declined 51 percent in 2011 and 19 percent in 2012. According to Securities and Exchange Commission filings, many major brokerage firms including Citigroup, Morgan Stanley, Merrill Lynch and UBS Financial Services used proprietary “feeder” funds to invest in the Paulson funds.

Paulson Hedge Fund and Full-Service Brokerage Firm Feeder Fund Investors Could Recover Losses

The feeder funds used by full-service brokerage firms to invest in Paulson’s Advantage and Advantage Plus Funds went by a variety of names, such as LionHedge Paulson, UBS Paulson Advantage Fund, Morgan Stanley HedgePremier Paulson, Paulson Advantage Access Fund and CAIS Paulson. Stock fraud lawyers say that all of the aforementioned funds invest in Paulson’s funds and that in some cases they may not have provided oversight or due diligence in the funds, despite representations made to investors.

Following the Advantage Fund’s decline, in May 2012 the fund was put on Morgan Stanley Wealth Management’s “watch list” and investors are now being advised to redeem. Three months later, Citigroup reportedly made a similar decision, pulling $410 million from Paulson’s funds. In light of the fact that the Paulson funds were sued by an investor in February 2012, many investors are contacting securities fraud attorneys about their losses. In the 2012 lawsuit, both Paulson & Co. and its funds were charged with deeply investing into SinoForest without conducting adequate due diligence and accused of breach of fiduciary duty.

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Securities fraud attorneys are currently investigating claims on behalf of Merrill Lynch customers who suffered significant losses as a result of their hedge fund investments and/or Fannie Mae Preferred Shares investments with the firm.

Merrill Lynch Customers Could Recover Losses Over Hedge Funds or Fannie Mae Preferred Stock

In particular, these stock fraud lawyers are looking into the sales practices of Merrill Lynch and its brokers in regards to the Coast Access II LLC hedge fund. Coast Access II LLC is a “feeder fund,” investing substantially all of its assets in Coast Diversified Fund LLC, a multi-manager, multi-strategy “fund of funds” which invests through the market neutral or relative value trading of several securities and commodities trading advisors, according to Coast Access’ SEC Form D filing. Coast Access II LLC’s place of principal business operations and executive offices are listed as Merrill Lynch Alternative Investments and the investment was offered through Merrill Lynch. However, securities fraud attorneys now believe that the hedge fund was recommended to certain Merrill Lynch clients, despite its unsuitability for those clients.

A recent FINRA arbitration proceeding concluded with an order for Merrill Lynch to pay two of its investors $1.34 million in connection with their Fannie Mae preferred shares investments. Allegedly, Merrill Lynch misrepresented the risks involved in this investment, marketing them as “safe.” As a result, the investors, clients of broker Miles Pure, suffered significant losses. Their claim included allegations that the firm was negligent in its supervision of Pure and had committed civil fraud. Pure now works for Morgan Keegan.

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Securities fraud attorneys are currently investigating claims on behalf of victims of James Ryan Lanier, a financial advisor for Merrill Lynch. Reportedly, Lanier was arrested on fraud, identity theft and money laundering related to embezzlement. Allegedly, Lanier, 33, embezzled over $800,000 from Merrill Lynch clients and was arrested in San Diego, California.

Defrauded Investors of James Ryan Lanier, Recently Arrested Merrill Lynch Financial Advisor, Could Recover Losses

According to the allegations listed in the 65-count indictment against Lanier, while he was working for Merrill Lynch as a financial advisor between 2008 and 2010, Lanier forged client signatures on fraudulent letters of authorization to Merrill Lynch client associates. These client associates were responsible for processing client funds through wire transfers. Purportedly, these letters also contained misleading and false statements that were intended to persuade the client associates to transfer funds from the investment accounts of clients to bank accounts under Lanier’s control.

According to the indictment, stock fraud lawyers say that Lanier deliberately sought out assistance from client associates who were not familiar with his clients to direct funds transfers. Lanier allegedly claimed Merrill Lynch clients had given voice approval on a recorded telephone conversation, though no such approval was given. Choosing client associates who were unfamiliar with his clients aided Lanier in his scheme.

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As a significant number of gas prepayment bonds ratings have been downgraded by Moody’s Investors Service, stock fraud lawyers are advising investors to be cautious regarding their investments in these bonds. As a result of downgrades in Goldman Sachs Group Inc., Citigroup Inc., JPMorgan Chase & Co., Credit Agricole Corporate & Investment Bank, Merrill Lynch & Co., BNP Paribas, Morgan Stanley, Royal Bank of Canada and Societe Generale, numerous bonds became subject to review and subsequent downgrades.

Investors Beware as Gas Prepayment Bonds Downgraded by Moody

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:

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A June 21st announcement by the Financial Industry Regulatory Authority (FINRA) stated that the regulator has fined Merrill Lynch, Pierce, Fenner & Smith Inc. The firm was fined $2.8 million for supervisory failures and failing to provide required trade notices, and ordered to pay $32 million in remediation to affected customers, plus interest. The supervisory failures allegedly resulted in overcharging customers in the form of unwarranted fees amounting to $32 million. Securities arbitration lawyers continue to file claims on behalf of investors who have been overcharged by the firms with which they invest.

News: Merrill Lynch Fined by FINRA

According to FINRA’s findings, Merrill Lynch failed to provide an adequate supervisory system from April 2003 to December 2011. This lack of adequate supervision allegedly resulted in customer billing that was not in accordance with contract and disclosure documents. This inaccurate billing affected almost 95,000 customer accounts. The unwarranted fees, plus interest, have since been returned to the affected customers by Merrill Lynch. Securities fraud attorneys say that when firms do not provide adequate supervisory systems, they can be held responsible for investor losses. This applies to both overcharges and instances where the firm does not supervise its brokers, some of whom then commit fraud.

In addition, Merrill Lynch did not provide customers with timely trade confirmations, as a result of computer programming errors, in certain advisory programs. Because of these errors, over 10.6 million trades in more than 230,000 customer accounts did not receive trade confirmations. Furthermore, Merrill Lynch did not properly identify its role on account statements and trade confirmations in certain transactions, specifically whether it acted as principal or agent. Securities arbitration lawyers, and FINRA’s decision, support the idea that computer programming errors are never an excuse for improper conduct on the part of a securities firm.

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Investment attorneys are seeking Merrill Lynch customers who purchased Mars CDO I, as they could potentially recover their losses through securities arbitration. Mars CDO I was sold to institutional and high net worth customers of Merrill Lynch. The Mars CDO I was underwritten by Merrill Lynch in 2007. However, each of the 30 CDOs underwritten by Merrill Lynch in 2007 was either in technical default, had its best-rated portion cut to junk, was in danger of being liquidated or was in the process of being liquidated by the summer of 2008. Stock fraud lawyers are now investigating how Mars CDO I was marketed and sold by Merrill Lynch.

Investors of Mars CDO I Could Recover Losses Through Securities Arbitration

Securities that are backed by underlying pools of loans or bonds are CDOs, or collateralized debt obligations. While these investments are inherently risky, they are relatively common among “qualified investors.” Currently, stock fraud lawyers are also investigating if Merrill Lynch properly disclosed the CDO risks to investors in the sale of Mars CDO I. Furthermore, the value of Mars CDO I may have been inflated and over-stated by Merrill Lynch. Many investment attorneys believe that Merrill Lynch either knew or should have known the 2007 CDO deals were bad in the existing mortgage market conditions, given the poor performance of the CDOs.

On January 31, 2012, a Financial Industry Regulatory Authority Arbitration Panel awarded $1.38 million to Bobby Hayes, an investor who purchased Collateralized Debt Obligations from Merrill Lynch in 2007. For more on this case, see the previous blog post, “After Securities Arbitration, Merrill Lynch Must Pay $1.4 Million to Investor Over CDO Loss.”

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