SEC Category Archives — Page 4 of 13 — Investor Lawyers Blog Published by New York, New York Investor Attorneys

Published on: April 9, 2013

Securities Arbitration Alternative for Medical Capital Notes Victims

On April 2, 2013, a federal judge rejected Wells Fargo & Co.’s request to dismiss investors’ class action against it. These investors suffered investment losses in Medical Capital Holdings Inc.-issued notes. In addition to the class action, many investors are choosing to file an individual securities arbitration claim with the help of a securities fraud attorney.

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U.S. District Court for the Central District of California judge David Carter denied in part Wells Fargo’s motion for summary judgment, allowing some of the claims made by investors to move forward.

Medical Capital is a medical-receivables company that was charged with fraud by the Securities and Exchange Commission in 2009 and subsequently went under. Since 2003, Wells Fargo has issued almost $2.2 billion in Medical Capital Holdings notes. The Medical Capital’s court-appointed receiver had, as of February, recovered $157.5 million for investors, but over $1 billion in unpaid principal is yet outstanding. Stock fraud lawyers hope to get that money back for their clients through the class action or individual FINRA securities arbitration claims.

Published on: March 26, 2013

TNP Non-traded REIT Loss Recovery

by InvestorLawyers

Securities fraud attorneys are currently investigating claims on behalf of TNP Strategic Retail Trust Inc. investors. TNP Strategic Retail Trust is a non-traded REIT, or real estate investment trust, which has filed a Securities and Exchange Commission Form 8-K March 19, 2013 that announced its dividend payments are suspended. No dividend payments will be paid for the first quarter of this year. Furthermore, TNP Strategic Retail Trust customers were told that they should not assume that they will receive dividends for the rest of 2013, either.

TNP Non-traded REIT Loss Recovery

The reason for the suspension of dividends stated by TNP Strategic Retail Trust is that it is unable to access short-term cash because it is in negotiation with lenders regarding whether it is in loan default. Declared effective on August 7, 2009, by the SEC, TNP Strategic Retail Trust is a non-traded REIT that, according to REIT Wrecks, raised $21 million through the end of Q3 2010. Additionally, TNP Strategic Retail Trust reportedly suffered a net loss and had a negative operating cash flow throughout the first nine months of 2010.

Stock fraud lawyers are investigating the possibility that brokerage firms may be held liable for the recommendation of TNP 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. The firms that recommended this investment to clients may have done so improperly, in which case investors may be able to recover losses.

Published on: February 26, 2013

Paulson Hedge Fund, Full-service Brokerage Firm Feeder Fund Investors Could Recover Losses

by InvestorLawyers

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.

Published on: February 15, 2013

Investors in Equity Linked Structured Products Tied to Apple Could Recover Losses

by InvestorLawyers

Stock fraud lawyers are currently investigating claims on behalf of investors who suffered significant losses in Equity Linked Structured Products which were tied to the Apple stock price. Apple stock has suffered a significant decline since last year, falling from more than $700 per share to less than $440 per share. While many Apple shareholders suffered losses as a result of this price decline, Equity Linked Structured Products, or ELSPs, that were tied to Apple’s stock price also suffered significant losses. Essentially, ELSPs are bonds that have a feature that allows them to be converted into other companies’ stocks.

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Features of ELSPs include high interest payments for a year or less. If the stock price of the company that the ELSPs are tied to remains close to the price of the stock at the time the bonds were issued, or increases, ELSP investors will get their money back when the investment comes due. However, if the stock price suffers a decline of more than 20 percent, the ELSPs can become shares of the stock — in this case, Apple — and the investor has no choice but to hold the investment until maturity.

Securities arbitration lawyers say that when Apple’s stock price increased substantially in 2012, full-service brokerage firms like Morgan Stanley, JPMorgan Chase and Barclays sold more than $722 million in ELSPs. In 2012, around 450 of the new structured products issued were tied to Apple, 75 percent of which suffered an estimated 15 percent decline in just one week. Most of these products are now underwater. In addition, many believe that investment banks were using ELSPs as an inexpensive hedging strategy against Apple’s stock price and benefited from these investments while investors were losing.

Published on: January 10, 2013

Investor Recovers $1.38 Million from Morgan Keegan

by InvestorLawyers

On December 17, a Financial Industry Regulatory Authority arbitration panel reportedly sided with an investor against Morgan Keegan & Co. Inc. Stock fraud lawyers say the FINRA arbitration panel awarded the investor $1.38 million in settling his complaint related to Morgan Keen proprietary bond funds called the Intermediate Fund. Of the award, $851,000 was for compensatory damages and $400,000 was for other compensation and legal fees.

Investor Recovers $1.38 Million from Morgan Keegan

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.

Published on: November 28, 2012

FINRA Now Arbitrating Claims Against Investment Advisers

by InvestorLawyers

A recent announcement from the Financial Industry Regulatory Authority stated that arbitration is open to disputes between investors and registered investment advisers, or RIAs. According to securities fraud attorneys, this is good news for investors who have been the victims of RIA fraud but can’t afford costly court proceedings. It has been unclear for quite some time whether the arbitration system was available to complaints against investment advisers, who are overseen by the Securities and Exchange Commission. But now, this November 1, 2012 guidance posted on FINRA’s website indicates the regulatory authority is, in fact, accepting those cases, though they are subject to certain conditions.

Investment fraud lawyers say that clients of investment advisers usually resolve disputes in court or alternate forms of arbitration, but these processes can be time-consuming and expensive. RIA arbitration disputes are typically heard by JAMS Inc. or the American Arbitration Association, which can cost tens of thousands of dollars more than FINRA arbitration. Furthermore, FINRA arbitration is more cost-effective and less time-consuming than court proceedings.

Securities fraud attorneys have been asking FINRA to make their arbitration proceedings available to clients of investment advisers and, it seems, the regulatory authority is listening despite the fact that many investment advisers oppose the idea. The change was mentioned by Linda Fienberg, head of FINRA’s dispute resolution unit, at a conference held by PIABA, the Public Investors Arbitration Bar Association, in Texas.

Published on: November 19, 2012

Many Investors Victim to Lost, Stolen Securities Fraud

by InvestorLawyers

In a recent Investor Bulletin, the Securities and Exchange Commission warned investors about lost and stolen securities fraud. According to the bulletin, upon retirement of a security certificate, the transfer agent cancels the certificate. This cancellation usually involves an alteration of the certificate and an accounting entry on the transfer agent’s books. Following the cancellation, Exchange Act rules state that the certificate or record of it be retained for at least six years. Investment fraud lawyers and the SEC say that many corporate bond issues have, in recent years, been cancelled long before their maturities. Unfortunately, there have been many instances in which these canceled certificates have been stolen and reentered the marketplace, resulting in fraud. Victims of this fraud include public investors, broker-dealers, transfer agents, public companies and creditors.

Many Investors Victim to Lost, Stolen Securities Fraud

In one case, many canceled bond certificates disappeared in 1992 after they were taken from a transfer agent’s warehouse and delivered to a certificate destruction vendor. These certificates had a face value of around $111 billion. Later, these certificates began to resurface all around the world. Many individuals, brokers and banks were defrauded when the certificates were used as loan collateral or sold for cash.

Securities fraud attorneys say the SEC’s 2011 Lost and Stolen Securities Programs’s report — which received reports and inquiries on missing, lost, stolen or counterfeit certificates — is staggering. During that year, 10,990,507 certificates inquires were made, 512,807 certificates reports were made and “hits” that resulted from certificates inquiries numbered 348,791. The certificates related to these hits, which warned that the certificates in question had been reported as stolen, lost, counterfeit, or missing and ineligible for transfer, were valued at around $8,789,674,628.

Published on: November 9, 2012

Recovery of Wells REIT Losses

by InvestorLawyers

Individuals who suffered significant REIT losses in Wells Timberland REIT and Wells REIT II could recover their losses through securities arbitration. In the latter part of 2011, the Financial Industry Regulatory Authority fined an affiliate of Wells Real Estate Funds, Wells Investment Securities Incorporated, for the use of misleading marketing materials. The $300,000 fine was related to the sales practices of the firm in relation to Wells Timberland REIT from May 2007 until September 2009. According to FINRA, 116 “improper, unwarranted or exaggerated statements” were included in the advertising literature. Some of these statements were about the distributions, redemption and diversification of the non-traded REIT. As a result, many of the individuals who invested in this REIT were investing in a product that was unsuitable for them, given their age, risk tolerance and investment objectives.

Recovery of Wells REIT Losses

Furthermore, in June of 2011, Wells REIT II was allegedly offered as a “safe, income-producing” investment. But by November of that year, it had reportedly lost over 25 percent of its initial value with its estimated per share value dropping from $10 to $7.47. Reportedly, this decline occurred even though the REIT’s properties are “some of the most prestigious office addresses and tenant corporations in the U.S.,” according to Wells officials, and despite the fact that these properties had an occupancy rate of 94.3 percent.

The 2010 annual report filed with the SEC for Wells REIT II stated that during that year, distributions to investors totaled approximately $313.8 million. This number includes monies paid to investors who decided to redeem their shares. However, Wells REIT II reported a net income of just over $23 million and total cash from operations of $270.1 million. With distributions exceeding cash from operations by nearly $44 million, investors should be asking themselves where the financing for distributions is coming from. According to the investment’s third quarterly report for 2011, Wells REIT II has paid over $1.1 billion in excess of earnings for cumulative distributions since its beginnings in 2004.

Published on: November 8, 2012

Recovery of CNL Lifestyle Properties REIT I Losses

by InvestorLawyers

Since the August announcement that CNL Lifestyle Properties REIT I’s value significantly dropped, investors of this product have been seeking avenues for recovering their REIT losses. In many cases, the answer may be Financial Industry Regulatory Authority securities arbitration. The $7.31 adjusted price per share, which is down from the original $10 per share price, represents a decline of over 25 percent of the investment’s value. The REIT had raised around $3.2 billion at the time the public offering was closed, so the decline in value represents investor losses of more than $870 million.

Recovery of CNL Lifestyle Properties REIT I Losses

According to a letter to CNL Lifestyle Properties shareholders, James Seneff, the CHL Lifestyle Properties Chairman, and Stephen Mauldin, CEO, indicated that the loss in value was primarily a result of their “discontinued mezzanine program” and a $2.3 million reduction of income in their “golf and lodging portfolios.” This reduction in income is reportedly a result of a lower operating net income and lease modifications. However, a press release filed with the Securities and Exchange Commission indicates that the value decline was also a result of a $1.9 million increase in asset management fees and general administrative expenses, a $0.5 million increase in bad debt expenses, a $2.6 million increase in depreciation expenses and a $1 million increase in loan costs amortizations and interest expenses. Reportedly, these increases are due to the increase in the number of properties.

Because CNL Lifestyle Properties is managed and advised by CNL Lifestyle Advisor, its own affiliate, management fees, advisory fees and other administrative expenses are paid to another CNL entity. In fact, an annual report stated that in 2011, $74.1 million was paid to CNL Lifestyle Advisor in asset management fees, acquisition fees and other expenses. Meanwhile, net income losses were reported for three years in a row.

Published on: November 5, 2012

Recovery of Inland American REIT Losses

by InvestorLawyers

Many investors are currently seeking recovery of their Inland American REIT losses through Financial Industry Regulatory Authority securities arbitration. Following Inland American’s 10Q Securities and Exchange Commission Q1 filing, investors were made aware of a current investigation being conducted by the SEC. According to this 2012 quarterly report, which was issued in May, Inland American had “learned that the SEC is conducting a non-public, formal, fact-finding investigation to determine whether there have been violations of certain provisions of the federal securities laws regarding our business manager fees, property management fees, transactions with our affiliates, timing and amount of distributions paid to our investors, determination of property impairments, and any decision regarding whether we might become a self-administered REIT.”

Recovery of Inland American REIT Losses

Inland American’s prospectus, initially filed in August 2005, shows fees and commissions including a .5 percent due diligence expense allowance, a 2.5 percent marketing contribution and a 7.5 percent selling commission. Furthermore, Inland American’s 2011 annual report indicates that a $40 million business management fee and a $1.6 million investment advisory fee to be paid to its business manager.

Other concerns related to the Inland American REIT that investors should be aware of include the fact that even though it was recognized as the largest non-traded REIT, with real estate assets totaling over $11 billion, nearly 30 percent of the REIT’s properties are located in only four cities. The quarterly report cited above states that “Geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas or natural disasters in those areas.” Furthermore, the report discloses the fact that around 16 percent of the properties owned by the REIT are leased by SunTrust Bank and AT&T.