Posts tagged ‘The White Law Group’
Potential for Recovery of Former LPL Financial Representative Arthur Lin Investment Losses
According to SEC documents, Arthur Lin, a former LPL Financial registered representative has been accused of selling “…$5,360,000 in unregistered promissory notes issued by Malarz Equity Investments, LLC to at least 20 investors, including 15 LPL customers.” Investors who have suffered losses as a result of working with Mr. Arthur Lin while he was registered with Financial Industry Regulatory Authority (FINRA) member firm LPL Financial may be able to recover their investment losses through the FINRA dispute resolution process.
On January 25th of this year, according to the SEC, “…a final judgment was entered by consent against Lin, permanently enjoining him from future violations…” of federal securities law. The SEC documents show that in addition to allegedly selling the unregistered promissory notes to some of LPL Financial’s clients between September 2006 and December 2008, their “complaint further alleges that Lin knowingly or recklessly made material misrepresentations or omitted to state material facts to investors regarding the risks of the investments and the use of investor funds.”
The White Law Group is currently investigating the potential for clients of Arthur Lin to recover a portion of their losses in claims related to LPL Financial and Mr. Lin through the FINRA arbitration process. The firm is dedicated to assisting damaged investors recover their investment losses through the FINRA dispute resolution process.
This situation seems to fit a common pattern that is a concern to investors, regulators and brokerage firms alike, “selling away.” When a FINRA registered representative conducts business outside of the firm with whom he is registered, that activity may be considered “selling away.” If a registered broker “sells away” from his firm, the firm may still be liable for negligent supervision of their broker representative and may be responsible for investment losses in a FINRA claim.
If you have suffered losses due to your investment with Mr. Arthur Lin and would like to speak to a securities attorney about your potential to recover those investment losses please call our Chicago office at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.
FINRA Outlines Investments They are Watching Closely in 2012
The Financial Industry Regulatory Authority (FINRA) outlined a list of investment products that they will be watching closely in 2012 because they feel that “concerns relative to business conduct and suitability issues are heightened.” This list of investment products comes from FINRA’s January letter outlining the “2012 annual regulatory and examination priorities.”
The White Law Group is all too familiar with many of the investment products on the list this year. Our securities law firm is dedicated to securities fraud litigation and helping investors who have suffered investment losses as a result of the inappropriate recommendations or actions of their financial professional or brokerage firm. We have spoken with and represented investors who have struggled with investments in mortgage backed securities, non-traded REITs, municipal securities, ETF’s, variable annuities, structured products, private placements, promissory notes, and life settlements. All of these products are commented on in FINRA’s letter and are on their radar for 2012. FINRA’s comments on all the products in the letter can be found below:
Residential Mortgage-Backed Securities and Commercial Mortgage-Backed Securities: Due to the embedded pre-payment option associated with mortgage-backed products, these securities carry significant re-investment risk, which can strongly affect the yield investors realize. Also, with collateralized mortgage obligations (CMOs), some tranches, such as interest-only strips or inverse floaters, carry much higher levels of risk than other tranches. Finally, the opaque nature of underlying collateral and the lack of a robust secondary market for some mortgage-backed securities should be considered when evaluating suitability.
Non-Traded REITs: Although non-traded REITs may offer diversification benefits as a part of a balanced portfolio, they do have certain underlying risk characteristics that can make them unsuitable for certain investors. As an unlisted product without an active secondary market, these products offer little price transparency to investors and little liquidity. The related financial information for these products may often be unclear to the investor, which makes the true associated risks and value difficult to ascertain. With many products, there are questions about valuation and concerns that in some cases distributions to investors are paid with borrowed money, over a lengthy period of time, with newly raised capital, or by a return of principal rather than a return on investment. The source of the distribution may not be transparent.
Municipal Securities: On the whole, municipal securities may offer significant benefits to many investors and can be an important component of a diversified portfolio. With some municipal securities, however, the lack of timely disclosures and complete financials often inhibit individual retail investors from making informed investment decisions, and may preclude associated persons from having a reasonable basis to recommend such a security. Member firms are reminded of their obligation to make suitable recommendations to their clients with respect to trading in the secondary markets. This includes obtaining sufficient information about the issuer to provide a reasonable basis that the recommendation is suitable. Separate and independent of the suitability obligation, member firms are also required, under MSRB Rule G-17, to disclose to their customers, at or prior to a sale of securities to a customer, all material facts about the transaction known by the dealer as well as all material facts about the security that are reasonably accessible to the market. Firms should ensure that representatives have access to this municipal issuer information (through MSRB’s Electronic Municipal Market Access (EMMA) system and/or other sources) to meet these requirements. Firms are also obligated to trade with their customers at prices that are fair and reasonable (including any markup or markdown).
Complex Exchange-Traded Products: Certain exchange-traded products that employ sophisticated strategies or access more exotic markets can expose investors to unexpected results or unforeseen risks. For example, exchange-traded funds (ETFs) that employ optimization strategies using synthetic derivatives can expose individual investors to the risk of significant tracking errors. In other words, the performance of the ETF may differ from that of the underlying benchmark during times of stress or volatility in unanticipated ways. These risks can be exacerbated when the ETFs employ significant leverage.
Variable Annuities: Although variable annuity products can offer valuable benefits to investors seeking predictable annuity streams, tax deferral for investment gains and flexible investment choices, they do have certain risk characteristics that can make them unsuitable for some investors. These products often have long holding periods and significant surrender fees, making them unsuitable for investors who have a need for liquidity. High fees and expenses may result in reduced performance in the underlying holdings, and high commissions make the product a target for switching. FINRA Rule 2330 imposes enhanced responsibilities on member firms with respect to variable annuities. Among other things, the rule requires that the firm or associated person have a reasonable basis to believe that a customer would benefit from certain features of a deferred variable annuity, such as tax-deferred growth, annuitization, or a death or living benefit, and that the particular recommended deferred variable annuity as a whole, the underlying subaccounts to which funds are allocated, and any rider or similar policy enhancements accompanying it are suitable for the customer. The rule, moreover, requires that the firm or associated person have a reasonable basis to believe that the customer has been informed, in general terms, of various features of deferred variable annuities. Firms are also required to implement surveillance procedures to detect any registered persons who are effecting deferred variable annuity exchanges at a rate that could indicate non-compliance with securities laws and rules, and to have procedures for taking corrective action if such activity is detected. The rule has a training component as well.
Structured Products: These products may be marketed to retail customers based on attractive headline yields or the promise of some level of principal protection. However, they can be complex, and have cash flow characteristics and risk-adjusted rates of return that are uncertain or hard to estimate. These products generally lack any active secondary market, which means investors must be willing to assume considerable liquidity risk in addition to market risk and the credit risk associated with the issuer of the product. These features can make the products unsuitable for some retail investors. For example, reverse convertibles are debt obligations that are typically tied to the performance of a security or basket of securities. These securities, which may offer a high rate of return, have complex pay-out structures often tied to a “knock-in” level, and involve elements of options trading. In addition, reverse convertibles not only expose investors to the financial risks associated with the debt obligation, but also to those risks associated with the underlying basket of securities.
Securities Offered Through Private Placements: Certain issuers seek to raise capital by offering unregistered securities in private placements. Many firms also offer securities in private placements to accredited investors under SEC’s Regulation D. Firms conducting private placements under Regulation D or any other applicable exemption from registration must conduct a reasonable investigation of the issuer, based upon the facts and circumstances, with careful attention to any “red flags,” to comply with the anti-fraud provisions and other FINRA rules, such as suitability. Proposed FINRA Rule 5123 (Private Placements of Securities) would help ensure that member firms and associated persons that sell applicable private placements provide relevant disclosures to each investor, and would also require that the private placement memorandum, term sheet or other disclosure document be filed with FINRA to help inform FINRA’s regulatory programs. In addition, firms are reminded that the definition of accredited investor has changed.
Unregistered Securities Acquired in Secondary Markets: As many high-profile companies have elected to remain private, secondary trading markets have emerged for their securities. However, despite their profile, many of these companies are difficult to value, as the issuers may not make financial statements publicly available. Acquiring interests in such securities through a pooled investment or single security “fund” introduces another layer of costs to the investor as well as risk associated with the fund manager.
Church Bonds: The credit quality of the underlying issuer and its true financial condition are often not transparent. Investors may be unaware of the substantial credit and market risk they are assuming with such investments. The source and nature of the underlying revenue streams of the issuer that are required to service the instruments are often less than clear. Further, as sales are frequently made on an affinity basis, these securities can be vehicles for fraud.
Promissory Notes: When investing in promissory notes, investors could assume substantial credit and market risk exposures that may not be transparent to them. Such notes may potentially be written by registered persons or by entities associated with registered persons, with or without their employing broker-dealer’s knowledge. Similarly, registered persons may offer and sell promissory notes issued by persons and entities not associated with a broker-dealer, again without their employing broker-dealer’s knowledge. At worst, such instruments are principally a vehicle to defraud clients who may believe that a broker-dealer is knowledgeable about the product and is recommending it as a suitable investment.
Life Settlements: Sales of existing life insurance policies to third parties—referred to as life settlements—have raised regulatory concerns, as these products generally have very high commissions. In 2009, FINRA published Regulatory Notice 09-42 about member firms’ responsibilities in marketing variable life settlements, as these are securities under FINRA jurisdiction. Recent decisions issued by the Delaware Supreme Court highlight the risk that insurers may challenge the validity of a contract based on a lack of insurable interest.
The full text of FINRA’s letter including the investment products they are watching for 2012 can be found at http://www.finra.org/web/groups/industry/@ip/@reg/@guide/documents/industry/p125492.pdf. The foregoing information, which is publicly available on FINRA’s website, is being provided by The White Law Group.
If you have suffered losses or believe you have been the victim of securities fraud due to your investment in mortgage backed securities, non-traded REITs, municipal securities, ETF’s, variable annuities, structured products, private placements, promissory notes, and/or life settlements The White Law Group may be able to assist you in pursuing recovery through the FINRA dispute resolution process. If you would like to speak to a securities attorney please call our Chicago office at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.
SEC Alerts Investors about Investment Fraud Risks related to Social Media
The SEC recently released an “investor alert” with the goal of helping “investors be better aware of fraudulent investment schemes that may involve social media.” The SEC acknowledges in the alert that social media has become an important tool for the investing public to accumulate information about all facets of investing. Investors are increasingly looking to social media like Twitter, YouTube, LinkedIn and Facebook for information on brokers and brokerage firms and also to do research on individual investments and investment vehicles. The SEC wants it to be known that “While social media can provide many benefits for investors, it also presents opportunities for fraudsters. Social media, and the Internet generally, offer a number of attributes criminals may find attractive.”
According to the SEC, social media provides those inclined to commit fraud the opportunity to “contact many different people at a relatively low cost.” Additionally, the ease at which individuals can create profiles and pages that may appear legitimate may be to their advantage. The alert says, “…that feeling of legitimacy gives criminals a better chance to convince you to send them your money.” Finally, social media provides an opportunity to those wishing to commit fraud with some anonymity which may “make it harder for fraudsters to be held accountable.”
The SEC goes on to give tips for how investors may use the positive aspects of social media for investing, while protecting the investors from fraudulent investments schemes. Like many investor alert’s, the SEC says being an “educated investor” in the best way to protect one’s self. They offer five tips to “avoid fraud online.”
1. “Be Wary of Unsolicited Offers to Invest”
2. “Look out for Common “Red Flags””
3. “Be Thoughtful About Privacy and Security Settings”
4. “Ask Questions and Check Out Everything”
5. Avoid “Common Investment Scams Using Social Media and the Internet”
- “Pump-and-Dumps” and Market Manipulations
- “Fraud Using “Research Opinions,” Online Investment Newsletters, and Spam Blasts”
- “High Yield Investment Programs”
- “Internet-Based Offerings”
You can find the full text of the SEC investor alert about social media at this address: http://investor.gov/news-alerts/investor-alerts/investor-alert-social-media-investing-avoiding-fraud
If you are concerned that you have been the victim of securities fraud and would like to speak to a securities attorney about your potential to recover your losses through securities arbitration please call our Chicago office at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, visit http://www.whitesecuritieslaw.com.
Investors Encouraged to Research Financial Advisers and Choose Carefully
The USA Today recently ran a story in which they gave some tips on diligently selecting a financial advisor and encouraged investors to conduct research and ask questions prior to selecting one.
Their article notes that in today’s investment environment where Ponzi Schemes and other frauds are plentiful, there are simple things that investors can do to protect themselves and get sound advice. As Financial Industry Regulatory Authority (FINRA) investor education executive Gerri Walsh was quoted as saying, “The vast majority of investment professionals are hard-working individuals who look out for the interests of their clients and customers.” USA Today offers a few tips that can assist the investing public in ensuring they have found a reputable broker who is likely to look out for their best interest.
Here are a few of the most pertinent points made in the article (full text of the article can be found here: http://www.usatoday.com/money/perfi/retirement/story/2011-12-05/how-to-find-the-best-financial-advisor-for-you/51660088/1):
1. Avoid mistakes that are often made by people in the market for an advisor including, “Failure to check out the background of a financial professional,” “Relying on professional designations,” and “Buying investments you don’t understand.”
2. Be wary of tactics which are sometimes used by some of the less reputable elements of the investment business including: “affinity fraud” – where fraudsters attempt to gain trust by way of relating to investors’ race, religion, or other group, “reciprocity” – a tactic where investors are offered something small, like a lunch, with the hope that the investors will feel indebted and invest in the particular investment deal which may or may not be suitable, and also “scarcity” – where investors are encouraged to act fast in order to avoid missing out.
3. The article also encourages people to research advisors, ask a lot of questions about their credentials/investment strategies, and make sure to know your own investment goals. One way to check the credentials of an adviser is by using the finra.org Broker Check.
If you are concerned that you have been the victim of investment fraud or believe that your financial professional’s actions have otherwise resulted in damages and would like to speak to a securities attorney about your potential to recover investment losses please contact our Chicago office at 312-238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.
FINRA Continues their Focus on Non-traded REITs with an Investor Alert
FINRA released an investor alert for public non-traded REITs “to help investors understand the benefits, risks, features and fees of these investments.”
This year FINRA has paid particularly close attention to the sale of non-traded REITs. In May, FINRA charged David Lerner & Associates “…with Soliciting Investors to Purchase REITs Without Fully Investigating Suitability.” David Lerner & Associates sell the Apple series of non-traded REITs. More recently, there has been discussion of proposals to modify regulations pertaining to how non-traded REITs are valued and how the prices of the products are listed on customer statements.
This most recent move by FINRA to shed light on non-traded REITs, by way of this investor alert titled Public Non-Traded REITs-Perform a Careful Review Before Investing, is a call for investors to be better educated about this type of investment vehicle.
Non-traded REITs are a legitimate investment option for the right investor, but it important for investments to be suitable for each individual investor.
In a public release FINRA noted that, “While investors may find non-traded REITs appealing due to the potential opportunity for capital appreciation and the allure of a robust distribution, investors should also realize that the periodic distributions that help make non-traded REITs so appealing can, in some cases, be heavily subsidized by borrowed funds and include a return of investor principal. Additionally, early redemption of shares is often very limited, and fees associated with the sale of these products can be high and erode total return.”
Sometimes unscrupulous or uniformed financial professionals have emphasized the positive attributes of non-traded REITs and encouraged unsuitable investors to purchase them. Non-traded REITs also often pay a high commission to brokers, sometimes as much as %10, which may in some cases motivate them to sell the products to unsuitable investors.
FINRA investor education official Gerri Walsh was quoted on FINRA.org as saying, “Confronted with a volatile stock market and an extended period of low interest rates, many investors are looking for products that offer higher returns in turbulent times. However, investors should be wary of sales pitches that might play up non-traded REITs’ high yields and stability, while glossing over the lack of liquidity, fees and other risks.”
The full text of the alert (available here http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/REITS/P124232) outlines a breadth of important information about non-traded REITs that all prospective investors should be encouraged to read. In their release about the alert FINRA highlights 4 “features, complexities, risks and costs associated with non-traded REITs.”
- “Distributions are not guaranteed and may exceed operating cash flow. In newer programs, distributions may be funded in part or entirely by cash from investor capital or borrowings. Distributions can also be suspended for a period of time or halted altogether.”
- “Lack of a public trading market creates illiquidity and valuation complexities. Most non-traded REITs are structured as a “finite life investment,” meaning that at the end of a given timeframe, the REIT is required either to list on a national securities exchange or liquidate. Many factors affect the valuation of non-traded REITs, including the portfolio of real estate assets owned, strength of the trust’s balance sheet, overhead expenses and cost of capital.”
- “Early redemption is often restrictive and may be expensive. Most non-traded REITs place limits on the amount of shares that can be redeemed prior to liquidation. These limits can be as restrictive as 5—or even 3—percent of the weighted average number of shares outstanding during the previous year. Additionally, the redemption price is generally lower than the purchase price, sometimes by as much as 10 percent.”
- “Non-traded REITs can be expensive. State and FINRA guidelines limit front-end fees to 15 percent, but a 15-percent front-end fee on a $10,000 investment means that only $8,500 is going to work for an investor.”
The White Law Group is currently involved in many cases involving non-traded REITs on behalf of damaged investors.
If you are concerned about your investment in a non-traded REIT and would like to speak to a securities attorney, please call our Chicago office at 312/238-9650.
The White Law Group, LLC is a national securities fraud, securities arbitration, investor protection, and securities regulation/compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida.
For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.