Articles Posted in Suntrust

Published on:

Securities fraud attorneys are currently investigating claims on behalf of investors who suffered significant losses in their accounts with GenSpring Family Offices LLC, a firm owned by a wholly-owned SunTrust subsidiary. Reportedly, arbitration cases have already been filed on behalf of ultra-high-net-worth investors which allege mishandling of investment accounts by GenSpring.

GenSpring Clients Could Recover Losses

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.

Published on:

Securities arbitration ended with a Financial Industry Regulatory Authority (FINRA) announcement on July 26 that SunTrust Robinson Humphrey Inc. and SunTrust Investment Services Inc. will pay a total of $5 million for “violations related to the sale of auction rate securities (ARS).” $400,000 of the $5 million fine will be paid by SunTrust IS for failure to provide adequate ARS procedures, sales material and training. The remaining $4.6 million will be paid by SunTrust RH, the underwriter of the ARS, for sharing material non-public information, using inadequate sales material, having inadequate procedures and training for the sales of ARS, and failure to adequately disclose increased ARS risk of failure.

The FINRA investigation determined that SunTrust RH became aware of stresses in the ARS market in late summer 2007. These stresses increased the risk of auction failure. SunTrust Bank instructed SunTrust RH to reduce the usage of the bank’s capital and began examining their financial capabilities. These stresses continued to increase. The firm’s sales representatives were not adequately informed of the risks and were simultaneously encouraged to sell SunTrust RH-led ARS issues.

FINRA Executive VP and Chief of Enforcement, Brad Bennett, stated “SunTrust Robinson Humphrey and SunTrust Investment Services withheld information about the ARS market which prevented their sales representatives from making proper recommendations and their customers for making informed decisions about ARS. Because of that, the customers were left holding illiquid securities when the auctions failed.”

Contact Information