Posts tagged ‘Wachovia’
Chicago Securities Fraud / Investment Fraud Attorney
Are you seeking to recover investment losses incurred as a result of the fraud or negligence of your financial professional or brokerage firm? The White Law Group may be able to help.
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. With over 30 years of securities law experience, including experience working at FINRA (f/k/a the NASD) and the SEC, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions.
The White Law Group exclusively represents investors seeking to recover investment losses incurred as a result of the fraud or negligence of their financial professional or broker-dealer. We review investment fraud cases involving all FINRA registered broker-dealers and have handled cases against most of the major broker-dealers, including Morgan Stanley, Wachovia, Wells Fargo, Banc of America, Merrill Lynch, Smith Barney, UBS, Edward Jones, Raymond James, Securities America, Royal Alliance, RBC Capital and Ameriprise.
The securities cases we review often involve some form of the following type of securities fraud: unsuitability, churning (or excessive trading), unauthorized trading, failure to execute, improper use of margin, and overconcentration (holding off an inordinately large position of one investment).
We review tons of securities cases per year involving all manner and scope of securities frauds, but it seems that many of the cases that we review often involve the same general types of investment products. Interestingly, these investment products are also the same products that pay financial advisors the highest commission. The investment products that we most see being abused in reviewing securities fraud cases are cases involving REITs, variable annuities and variable universal life policies, Promissory Notes, Tenants-In-Common (TICs), and mutual funds (particularly proprietary mutual funds – when a brokerage firm pushes its own mutual funds (i.e. a UBS financial advisor recommending UBS mutual funds)).
To speak to an experienced securities attorney, please call The White Law Group at 312-238-9650. For more information on the firm, please visit our website at http://www.whitesecuritieslaw.com.
UBS Promissory Note Securities Litigation
The White Law Group is currently representing two former UBS financial advisors in a litigation matter involving their alleged promissory note obligation to UBS. Based on our preliminary investigation, it appears that these particular financial advisors were forced to leave UBS because UBS did away with a trading program that was critical to their business and that the platform’s elimination greatly impacted their ability to effectively service their clients.
Notwithstanding the fact that these financial advisors were basically forced to leave UBS and their business has suffered as a result, UBS has sent the advisors a demand letter for the amounts they owe on their promissory note agreements and has indicated that they intend to file claims against these financial advisors for breach of contract if the matters are not quickly resolved.
We are investigating whether other UBS financial advisors were similarly forced to leave the firm as a result of the elimination of any trading platforms. Such information would assist us in demonstrating that UBS’s failure to provide these financial advisors with the necessary trading platform to conduct their business was a firm wide issue that impacted many financial advisors.
If you have any information that would assist us in our investigation, please contact our Chicago, Illinois office at 312-238-9650.
The White Law Group is a national securities litigation law firm with offices in Chicago, Illinois and Boca Raton, Florida. The firm is intimately familiar with the unique issues involved in promissory note cases, often representing financial advisors in promissory note litigation matters, and having (in the past) handled promissory note litigation cases on behalf of many of the larger broker-dealers (including Banc of America Investment Services, Morgan Stanley Smith Barney, Wells Fargo, Wachovia, and Ameriprise).
For more information on the firm, please visit our website at http://www.whitesecuritieslaw.com.
Representing Foreign Investors In FINRA Arbitrations
It is not uncommon for foreign investors to seek to establish an investing relationship with a United States based broker-dealer (either because the client is seeking the security of investing in U.S. investments, or because these firms provide the client with the ability to discreetly invest their assets outside of their home country).
Whether the client realized it or not when establishing their account with these U.S. broker-dealers, the client likely signed an arbitration agreement requiring them to submit to FINRA arbitration in the event of a dispute. In so doing, the client agreed to resolve any dispute (including a claim related to investment losses) through FINRA’s Dispute Resolution process.
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. The firm represents foreign investors in claims against their U.S. brokerage firm in such FINRA arbitrations.
The Firm has its offices in Chicago, Illinois and Boca Raton, Florida because of the obvious benefits of being located so close to the FINRA Dispute Resolutions offices in those cities (FINRA’s Southeast headquarters is located at Boca Center Tower 1, 5200 Town Center Circle, Boca Raton, FL 33486- less than one mile from our office, and FINRA’s Midwest headquarters is located at 55 West Monroe Street, Suite 2600, Chicago, IL 60603-1002- close to the firm’s Chicago office).
Having our offices located so close to FINRA’s regional headquarters has its advantages, particularly since FINRA assigns cases to the FINRA office closest to where the client resides. For example, an investor residing in Central or South America will typically have their case assigned to FINRA’s Boca Raton, Florida Dispute Resolution office with the hearing conducted in Miami. As such, having our office located in Boca Raton has huge benefits in administering these cases. Additionally, Rose M. Schindler, who is Of Counsel to The White Law Group, is the former Regional Director of FINRA Dispute Resolution’s Boca Raton office.
We have reviewed cases on behalf of many foreign investors with claims against United States brokerage firms, including reviewing claims on behalf of investors residing in Colombia, Argentina, Brazil, Venezuela, Costa Rica, Puerto Rico, the Virgin Islands, Bolivia, Ecuador, Paraguay, Uruguay, and Chile. These claims often involve large American brokerage firms servicing Latin American investors from their offices in Miami, firms such as Merrill Lynch, Morgan Stanley Smith Barney, Wachovia, Wells Fargo, Ameriprise, and UBS.
With over 30 years of securities law experience, including experience working at FINRA (f/k/a the NASD) and the SEC, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions.
To contact The White Law Group, please call 312-238-9650. Or, for more information about The White Law Group or securities fraud, you can also visit our website at http://www.whitesecuritieslaw.com.
Financial Advisor Promissory Note Securities Litigation Representation
The White Law Group is now representing financial advisors in Promissory Note disputes and claims related to the financial advisors prior employment.
The White Law Group is a national securities fraud, securities arbitration, investor protection and securities regulation/ compliance law firm with offices in Chicago, Illinois and Boca Raton, Florida. The firm’s lawyers have extensive experience in Promissory Note disputes, including previous experience representing Banc of America, Merrill Lynch, Morgan Stanley Smith Barney, Wachovia, Wells Fargo and Ameriprise in such claims. This background allows the firm to understand exactly how these firms litigate Promissory Note cases and the firms’ typical settlement parameters.
If you have questions regarding your outstanding Promissory Note, please contact our Chicago office at 312-238-9650. For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.
Here is some additional information regarding the Promissory Note litigation process for your reference:
Promissory Notes (often called up-front forgivable loans) are commonly used as a recruiting tool by many of the major brokerage firms in the securities industry, including Morgan Stanley Smith Barney, Banc of America Investment Services, Wachovia Securities, Wells Fargo, Merrill Lynch, Ameriprise (formerly H&R Block), and UBS Financial Services. Essentially, brokerage firms use the up-front forgivable loans to recruit financial advisors from other firms to bring their clients (or “book of business”) to the new firm. Typically these loans are then forgiven by the hiring firm on a monthly or annual basis and if the financial advisor remains with the new firm through the duration of the forgiveness period of the loan, the broker does not have to repay the loan. If, however, the financial advisor resigns from the brokerage firm, or is terminated, before the loan is forgiven, the broker is contractually obligated to repay the outstanding amounts owed on the loan and the brokerage firm will often move to collect the outstanding amount still owed on the loan.
Typically, the brokerage firm does this by sending a “demand letter” requesting that the financial advisor repay the money owed on the promissory notes. If this demand letter is sent by an outside collection agency, including an outside law firm, the demand letter is required to be in compliance with the Fair Debt Collection Practices Act. As such, the demand letter should include (1) the outstanding balance on the promissory notes (the amount owed, including interest), (2) the demand letter should provide the debtor with thirty days to dispute the debt, and (3) the demand letter should provide validity of the debt (usually by attaching a copy of the promissory notes).
If the broker fails to respond to the demand letter or if the financial advisor and brokerage firm are unable to reach a mutually satisfactory settlement agreement, the brokerage firm will often then elect to sue the broker for failure to repay the promissory note(s). If the brokerage firm does sue the former financial advisor, such suit will likely be filed with FINRA (formerly the NASD) since virtually all brokers at the onset of their employment with their now former employer agreed to arbitrate any dispute between themselves and their employers through FINRA arbitration as part of their employment agreements. A similar arbitration clause is also usually included in the promissory notes. Moreover, the financial advisor’s U-4 sets forth that a financial advisor (or associated person in the industry) agrees to FINRA’s jurisdiction for disputes.
Once the brokerage firm’s claim against the former broker is filed, pursuant to FINRA Rule 13303, the financial advisor has 45 days to file an Answer. The common defenses/counterclaims asserted by financial advisors in defending against claims brought by brokerage firms to collect on these promissory notes are misrepresentation/fraudulent inducement (related to promises regarding the terms of employment), discrimination, wrongful termination/constructive discharge, unjust enrichment (related to clients the financial advisor may have left behind), and breach of contract. Another equity argument that is often asserted is that the forgiveness of the notes should be pro rated (although the notes are often forgiven on an annual basis, the broker can still argue that equity should provide that the forgiveness date should be the date that the broker left the firm and not the date of the last annual forgiveness).
Once the defenses or counterclaims are filed, the parties then proceed to the discovery process and set the matter for hearing. The case is then decided by either an industry or public panel (depending on the counterclaims raised).
If the brokerage firm takes their claim all the way to hearing and gets an award against the financial advisor, the financial advisor is required by FINRA Rules to pay the award. Specifically, Rule 9554(a) provides that an associated person’s failure to comply with a settlement agreement or award related to an arbitration or mediation within 21 days of notice by FINRA will result in a suspension of the associated person from the industry. As such, if a financial advisor gets an arbitration award against him/her related to his/her obligations on their promissory notes, and fails to pay that award, the broker may be suspended from the industry. There are a few ways to avoid being suspending without paying the award (including agreeing with the brokerage firm to settle the award with payments over time, declaring bankruptcy, or demonstrating to FINRA a legitimate inability to pay the award) but generally speaking a financial advisor is obligated to pay the award if the brokerage firm prevails.
Before entering into any up-front forgivable loan agreement with a brokerage firm, there are a few significant provisions in virtually every Promissory Note of which financial advisors should be aware.
(1) Promissory Notes will almost always include a provision setting forth the financial advisors employment as an “at-will” employee. A typical example of such a provision is as follows:
“This Agreement is not a contract of employment for any period of time. The Borrower’s employment with the Lender is on an “at-will” basis which means that the employment relationship can be terminated at any time for any reason or no reason by either party. Nothing herein shall be construed as a contract of employment for a definite term.”
The reasons this provision is included are obvious. While most employees are at-will employees, brokerage firms still want this arrangement to be spelled out so that the employee can not later argue that the brokerage firm made promises of employment for a specified period of time. Although there is caselaw that claims that an NASD (now FINRA) arbitration agreement changes a broker’s at-will relationship with a brokerage firm to “something else,” requiring justification for a discharge (see, e.g. Paine Webber v. Agron, 49 F. 3d. 347, 352 (8th Cir. 1994)), “at-will” provisions are generally enforced.
(2) Promissory Notes also almost always provide for the broker being obligated to reimburse the brokerage firm for any costs of collection in the event of default (including attorney’s fees and costs). Although many states require that an attorney fees provision be reciprocal (meaning that the broker would be entitled to his/her attorneys’ fees if he/she disputes the debt and ultimately prevails), the provision in the promissory notes will not be drafted that way, and a broker should be aware that they may be on the hook for the brokerage firm’s attorneys fees if they fail to repay their prior employer.
(3) Similarly, the Notes also generally provide for interest to accrue both while the broker remains with the brokerage firm and after default. As such, if the broker is in default and is considering settling, it is better to do so sooner rather than later.
(4) Another provision that is significant is that the Notes usually provide for the brokerage’s firm authority to restrict the broker’s brokerage account if any amounts owed on the loans become outstanding. A typical example of such a provision is as follows:
“The Lender shall have the right, upon default, without notice, to withhold any monies payable by it to the Borrower, as commissions or otherwise or from any amounts payable under any non-qualified deferred compensation or similar arrangement sponsored by the Lender, and to withhold other monies, securities, commodities or other properties of the Borrower which may at any time be in the possession of the Lender for any purpose; and to apply such monies, etc., to satisfy the indebtedness due under this Note. The Borrower hereby authorizes and consents to the aforementioned deductions.”
Depending on the broker’s separate customer agreements, these restrictions may apply to joint accounts in addition to individual accounts, and if the financial advisor leaves his/her employer owing money on a promissory note and with money in a brokerage account held by their employer, the brokerage firm is likely to restrict that account.
Investigation Into Possible Securities Fraud Involving Sub-Prime Issues Such As American Home Mortgage, New Century Financial Corp., and Novastar
The White Law Group is investigating the appropriateness of financial advisor’s recommendations that investors purchase sub-prime issues like American Home Mortgage, New Century Financial Corp., Novastar and other similar companies.
In many cases, these investments were pitched by stockbrokers and financial advisors at Merrill Lynch, Wachovia (n/k/a Wells Fargo), Smith Barney, AG Edwards, Edward Jones, and Morgan Stanley as safe and secure investments. Unfortunately, these representations proved to be false and clients suffered significant and sometimes complete investment losses.
American Home Mortgage has even been the subject of a class action which alleges that the company, contrary to its public posture as a prime mortgage lender, abandoned its underwriting guidelines to drive growth by issuing high-risk loans to borrowers with poor credit.
Furthermore, the class action alleges that mortgage loans that American Home sold on the secondary market and which the Company was then forced to repurchase due to their low quality were held by the Company for full value in its investment portfolio, rather than being sold at a loss or marked down.
The White Law Group is investigating whether broker-dealers’ recommendations that retail investors invest in these sub-prime companies were appropriate in light of the extraordinary risk involved, and whether these firms failed to perform the necessary due diligence to determine the risk involved in investing in such companies prior to recommending that their clients invest.
If you have any information that may assist us in our investigation into possible securities fraud involving the sale of sub-prime issues such as American Home Mortgage, New Century Financial Corp., and Novastar by financial advisors, please contact The White Law Group 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. With over 30 years of securities law experience, including experience working at FINRA (f/k/a the NASD) and the SEC, The White Law Group has the expertise to help investors defrauded in securities, investment and financial business transactions. For more information on The White Law Group, please visit our website at http://www.whitesecuritieslaw.com.