Published Article Explains Auction Rate Securities

March 1, 2013

LP attorneys expound on the troubled history of ARS bonds.

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Analysis: FINRA steps up to arbitrate investment adviser disputes

Nov 2, 2012

Reuters)Wall Street's industry-funded watchdog does not have an official say over registered investment advisers, but it is not shy about stepping up with a solution to resolve their legal disputes.

The Financial Industry Regulatory Authority (FINRA) is opening its arbitration forum to disputes between registered investment advisers (RIAs) and investors. FINRA has long run an arbitration system where the securities brokerages it regulates and their customers must resolve legal disputes.

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David Lerner's firm ordered to pay $12 million to customers

Oct 22, 2012

Reuters) - The Financial Industry Regulatory Authority said on Monday it had sanctioned David Lerner Associates Inc to pay about $12 million to customers that bought into a $2 billion real estate investment trust (REIT) and to those who were charged excessive markups.

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Radio pitchman’s investment empire under siege by financial regulators

July 9, 2012

David Lerner has made a fortune peddling controversial real estate investments for 20 years, but has left a trail of complaints, litigation and regulatory sanctions.

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UPDATE 3-U.S. SEC fraud lawsuit vs Morgan Keegan revived

May 2, 2012

* Investors were told auction-rate debt had low or zero risk

* Appeals court says broker statements could be material

* Says lower court erred in dismissing SEC case

* Raymond James bought Morgan Keegan last month from Regions

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FINRA Hearing Panel Fines David Lerner Associates $2.3 Million for Selling Municipal Bonds, CMOs to Retail Customers at Unfair Prices, and for Supervisory Violations

 April 4, 2012     Restitution Provided to Customers; Firm's Head Trader Fined and Suspended

WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that a FINRA hearing panel ruled that Long Island-based David Lerner Associates, Inc. (DLA) charged excessive markups on municipal bond and collateralized mortgage obligation (CMO) transactions over a two-year period, causing the firm's retail customers to pay unfairly high prices and receive lower yields than they otherwise would have received. The panel fined DLA $2.3 million for the markup and related supervisory violations, and ordered the firm to pay restitution of more than $1.4 million, plus interest, to affected customers. The panel also fined its head trader William Mason $200,000 and suspended him for six months from the securities industry. The ruling resolves charges brought by FINRA's Department of Enforcement in May 2010.

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Morgan Keegan seeks to reverse sports agent ruling

February 23, 2012

(Reuters) - Morgan Keegan & Co is hoping to recover money lost to a professional sports agent, who was awarded $400,000 in a securities arbitration ruling against the brokerage last week.

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Morgan Keegan must pay sports agent $400,000

February 21, 2012

(Reuters) - A sports agent, whose company represents star clients including Denver quarterback Tim Tebow, won $400,000 in a ruling against brokerage Morgan Keegan & Co, due to personal losses from bad bond investments.

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FINRA sues David Lerner founder for misleading investors

January 30, 2012

(Reuters) - David Lerner, who owns a brokerage that regulators say misled investors in its marketing of real estate securities, is now charged with similar misdeeds for statements he made to quell anxious customers, according to a complaint.

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Life Partners Sued by SEC

January 4, 2012

The Securities and Exchange Commission sued Life Partners Holdings Inc. and three top executives, alleging a years-long disclosure and accounting fraud that involved misleading financial statements and backdated documents shown to auditors.

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FINRA Fines Wells Fargo $2M Over Broker's Sales, Missed Discounts

December 15, 2011

The Financial Industry Regulatory Authority fined Wells Fargo & Co. (WFC) $2 million for unsuitable sales of reverse convertible securities through one broker to 21 customers and for failing to provide sales charge discounts to unit investment trust transactions to eligible customers.

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Lerner resorted to tricks to plump up Apple distributions: Suit

October 14, 2011

Plaintiffs claims B-D used a line of credit and returning capital to hike dividends; 'stark and startling'

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Finra wants faster valuations of nontraded REITs

September 20, 2011

Finra is putting the finishing touches on a rule proposal that would shorten the amount of time that broker-dealers have to come up with estimated valuation of a nontraded REIT.

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Dodd-Frank Forces Early Call in SEC Probe of Former Fannie Mae Chief Mudd

September 6, 2011

Last March the U.S. Securities and Exchange Commission told Daniel Mudd, former head of Fannie Mae, that he could face claims for his role in the firm’s collapse. He may be the first chief executive officer to benefit from a rule that regulators sue or drop such cases within six months.

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Apple REIT Cos. Considering Merger of its Non-Listed Hotel REITs

August 24, 2011

Apple Real Estate Investment Trust Cos. in Richmond, VA, is evaluating a potential consolidation of four of its five non-listed hotel REITs: Apple REIT Six, Seven, Eight and Nine. A potential consolidation could also include a listing of the stock of the combined enterprise for trading on a national exchange.

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Regulator wants to firm up pricing of illiquid securities

July 19, 2011 - Investment News

Finra is continuing to shake up the way broker-dealers show the value of illiquid investments such as non-traded real estate investment trusts and private placements on clients' account statements.

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Nontraded REITs Are Put on Notice by SEC

June 29, 2011

The Securities and Exchange Commission is intensifying its scrutiny of the booming business of real-estate investment trusts that aren't traded on a stock exchange, SEC officials say.

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SEC Keeps Its Secrets On Finra Oversight

June 16, 2011

NEW YORK (Dow Jones)--Chairman Mary Schapiro's commitment to more transparency at the Securities and Exchange Commission doesn't appear to extend to its supervision of Wall Street's self-regulator, the Financial Industry Regulatory Authority.

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Finra files a complaint against David Lerner Associates Inc.

June 5, 2011

David Lerner Associates Inc. has been accused of targeting unsophisticated seniors while selling real estate investment trust shares without considering whether the illiquid securities were suitable for its clients.

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Finra Sues David Lerner Firm

June 1, 2011

Investment broker David Lerner emerged in recent years as one of the most successful money-raisers in the real-estate business by touting his ability to produce consistent and steady returns in the 7%-to-8% range for mom-and-pop investors.

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Law Firms Levin Papantonio, Fishman Haygood and Schneider Wallace Announce Investigation of Securities Claims Against Inofin, Inc.

April 27, 2011

3 National Law Firms Combine Forces to Investigate Alleged Violations of Federal Securities Laws, Including Diverting Millions of Dollars in Investor Funds for Personal Benefit

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Feds: Insider Scheme Spanned 17 Years

April 7, 2011

For 17 years, Matthew Kluger and Garrett Bauer assiduously avoided each other, communicating through a gobetween— and over that time, made each other rich in one of the longest-running insider-trading schemes ever uncovered, federal prosecutors alleged Wednesday.

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Wachovia Targeted Over Sale Of CDOs

April 4, 2011

The Securities and Exchange Commission is preparing to bring civil charges against Wachovia Corp., the oncetroubled bank now owned by Wells Fargo & Co., for allegedly overpricing mortgage-bond deals, according to people familiar with the matter.

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(Non)Binding Arbitration

April 4, 2011

Disputes between investors and brokerages are handled by arbitrators. But their rulings aren't always the end of the line.

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More SEC Trouble For Freddie Mac

February 28, 2011

The U.S. Securities and Exchange Commission appears to be deepening its investigation of Freddie Mac. The government-sponsored enterprise said Donald Bisenius, executive v.p. in charge of single-family credit guarantees, has received a Wells notice from the SEC, shortly following receipt of a notice by Anthony Piszel, the agency’s former cfo who left in 2008. While Freddie Mac’s filing with the SEC did not offer details about allegations, observers believe the notices stem from a 2008 SEC investigation into whether the agency has violated federal securities laws.

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Freddie Mac Investigation: Buy, Sell or Hold?

February 25, 2011

The quasi governmental mortgage company Freddie Mac (OB: FMCC) and its big sister Fannie Mae (OB: FNMA) have been under intense Federal scrutiny since handing over full control to the government in September 2008. The SEC has been looking closely at their accounting practices searching for evidence of corporate fraud. Now things are heating up on Freddie Mac in a big way.

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SEC Probe of Freddie Mac Deepens

February 25, 2011

A top Freddie Mac executive received a Wells notice from the Securities and Exchange Commission, the company said on Thursday, a sign that the SEC has deepened its investigation into the mortgage-finance giant.

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Mutual Funds Extend Streak of Net Inflows

February 24, 2011

Long-term mutual funds had estimated net inflows of $8.5 billion in the latest week as investors added money to nearly all fund categories, according to Investment Company Institute.

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SEC's Top Lawyer Sued in Madoff 'Clawback' Case

February 24, 2011

The Securities and Exchange Commission on Wednesday moved to quash speculation that its top lawyer decided to step down because he is being sued as part of a "clawback" lawsuit by the trustee seeking to recover assets on behalf of victims of Bernard Madoff's fraud.

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SEC announces $10M settlement with TD Ameritrade

February 3, 2011

OMAHA, Neb. (AP) -- TD Ameritrade has agreed to a $10 million settlement for failing to properly supervise representatives who misled investors about the safety of a money-market mutual fund that "broke the buck" in 2008, the Securities and Exchange Commission said Thursday.

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SEC OKs all-public arbitration panels

February 1, 2011

The Securities and Exchange Commission yesterday approved a Financial Industry Regulatory Authority Inc. proposal to give investor claimants the option of using all-public arbitration panels.

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SEC Probes Company Over Life-Span Data

January 31, 2011

The Securities and Exchange Commission is investigating Life Partners Holdings Inc., a Waco Texas, company that has arranged for investors to buy several billion dollars of life-insurance policies from their original owners, according to four people who have been contracted recently by the agency.

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Levin Papantonio's Peter Mougey Inducted as President of National Securities Bar (PIABA)

October 15, 2010

Peter Mougey, a partner in the Pensacola-based law firm Levin Papantonio was, on Friday, October 15, inducted as the president of PIABA, the national securities bar. Mougey is the chair of the firm’s securities department.

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Morgan Keegan Readies $200 Million Settlement with Regulators

September 15, 2010

Morgan Keegan announced on July 27, 2010 that it believed it was close to settling with the SEC, FINRA and the Multi-State Fraud Task Force for $200 million. The deal is not final but they felt confident enough to announce they were taking a $200 million charge on the settlement amount. This represents less than 20% on the dollar of investor’s trading losses on the RMK Funds.

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California Judge Rejects Morgan Keegan Appeal of $1.5M Award

July 06, 2010

A federal judge in California has thrown out an attempt by Morgan Keegan & Co. to vacate a nearly $1.5 million arbitration award won against the firm by retired NBA star Horace Grant.

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Birmingham investors' lawsuit claims Regions' Morgan Keegan mutual funds were misleading

June 23, 2010

The RMK Select mutual funds which cost investors billions in losses were illiquid, sold under false pretenses, and based on the riskiest of subprime mortgages, according to a new lawsuit filed by a group of Birmingham-area investors.

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Administrative hearing set in Alabama on allegations against brokerage firm Morgan Keegan

April 30, 2010

JACKSON, Miss. (AP) - Morgan Keegan & Co. has been granted an administration hearing on allegations that its brokerage firm of costing investors, including retirees, more than $2 billion through fraudulent and reckless business practices.

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S.E.C. Says Morgan Keegan Misled Brokers and Clients

April 8, 2010

When the subprime credit structure began to shake and then to crumble, money managers who had invested in it were faced with hard decisions.

The first was whether to bail out or double down, either admitting error or asserting that the market was overreacting. The second was what to tell investors and the brokers who dealt with them, The New York Times’s Floyd Norris writes. What values should be assigned to securities that no one wanted to buy?

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Finra, SEC and state regulators swarm Morgan Keegan with fraud charges

April 7, 2010

State and federal regulators teamed up today to file potentially devastating enforcement actions against Morgan Keegan & Co. Inc. and its asset management unit, Morgan Asset Management Inc., over the firms' management and sale of failed bond funds.

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FINRA Files Complaint Against Morgan Keegan & Company for Misleading Customers Regarding Risks of Bond Funds and Advertising, Other Violations

April 7, 2010

The Financial Industry Regulatory Authority (FINRA) announced today that it has filed a complaint against Morgan Keegan & Company, Inc., charging the firm with marketing and selling seven affiliated bond funds to investors using false and misleading sales materials – costing investors well over $1 billion. In addition to an unspecified fine, FINRA is seeking disgorgement of all ill-gotten profits and full restitution for affected investors.

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SEC Charges Morgan Keegan and Two Employees With Fraud Related to Subprime Mortgages

April 7, 2010

The Securities and Exchange Commission today announced administrative proceedings against Memphis, Tenn.-based firms Morgan Keegan & Company and Morgan Asset Management and two employees accused of fraudulently overstating the value of securities backed by subprime mortgages.

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Regulator takes control of Tampa's GunnAllen Financial

March 22, 2010

NTAMPA – GunnAllen Financial Inc., a Tampa investment brokerage that was briefly controlled by businessman John Sykes, has fallen below minimum capital rules set by federal regulators and did not open for full-service business this morning.

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Lehman Brothers accounting tricks possibly illegal

March 19, 2010

NEW YORK (AP) - A Lehman Brothers whistleblower warned his bosses that accounting gimmicks the bank used before its collapse may have been illegal, his lawyer said Friday.

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Taking Aim at the Brokers

October 19, 2009

Investors burned by brokers are getting a better shot at winning redress.

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UBS Sold Unsuitable Lehman Securities, New Hampshire Alleges

June 4, 2009

UBS AG, Switzerland’s largest bank, recommended unsuitable investments to clients who bought securities underwritten by Lehman Brothers Holdings Inc., New Hampshire securities regulators said.

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UBS Downgrades Lehman Bros. (LEH) to Neutral

March 17, 2009

Lehman Brothers Holdings Inc. (Lehman Brothers) serves the financial needs of corporations, governments and municipalities, institutional clients and high-net-worth individuals worldwide.

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Pension boards set sights on Merrill Lynch

January 30, 2009

Two Pensacola pension funds are taking aim at Merrill Lynch for what they claim are millions of dollars in losses to employee retirement funds. The board of trustees of the Firefighters' Pension Fund has filed suit in U.S. District Court in Pensacola against the brokerage company and one of its former senior vice presidents. The board claims bad advice and conflicts of interest led to the plan losing more than $3 million over seven years.

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Merrill Lynch Charged with Misleading Pension Clients

January 30, 2009

The Securities and Exchange Commission charged Merrill Lynch, Pierce, Fenner & Smith, Inc., along with former Merrill Lynch investment adviser representatives, Michael Callaway and Jeffrey Swanson, with securities laws violations associated with the firm’s pension consulting practices. The charges stem from the firm’s relationships with money managers hired to control portions of pension fund portfolios. Specifically, the firm misled pension consulting clients about its money manager selection process and failed to disclose conflicts of interest when recommending money managers.

Merrill Lynch neglected to inform its clients of arrangements whereby money managers were executing the majority of their trades through Merrill Lynch, allowing managers and advisers to increase fees at the cost of the pension plan. SEC officials noted that this case should remind all pension consulting businesses that they must disclose all material conflicts of interest to their advisory clients.

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Bank of America Failed to Disclose Merrill’s Position

January 22, 2009

Bank of America executives recently revealed their failure to provide shareholders with complete information before their December vote to acquire Merrill Lynch. Specifically, company executives did not disclose the losses already sustained by Merrill Lynch prior to the merger. Since the transaction, Bank of America has received an assistance package from the government including a $20 billion infusion. On the news of its omissions and its $1.79 billion fourth quarter loss, Bank of America shares fell 45% in only five days.

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Hyperion Changes Closed-End Fund Names and Symbols

December 18, 2008

Continuing the management transition for the Closed End Mutual Funds formerly managed by James Kelsoe, Hyperion Brookfield has announced several name and symbol changes. The RMK Advantage Income Fund (RMA) is now the Helios Advantage Income Fund (HAV). The RMK High Income Fund (RMH) is now the Helios High Income Fund (HIH). The RMK Multi-Sector High Income Fund (RHY) is now the Helios Multi-Sector High Income Fund (HMH). The RMK Strategic Income Fund (RSF) has also been changed to the Helios Strategic Income Fund (HSA). The name changes are designed to create a unified brand across all Hyperion Funds.

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US Officially in Recession

December 1, 2008

The National Bureau of Economic Research announced that the US economy has officially been in recession since December 2007. The official announcement was a confirmation of what many Americans already knew. The confirmation triggered a 7.7% drop in the Dow Jones industrial average. Forecasters are predicting a prolonged recession that may set a postwar record for length.

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Lehman CEO Terminated

November 5, 2008

Lehman Brothers announced that its Chief Executive Officer, Richard Fuld, will leave the company at the end of the year. Fuld, who made $34 million in 2007, will not receive any severance or bonus upon his departure. Fuld was the company’s CEO from 1993 until the bankruptcy when the restructuring officer took over operations. When Lehman declared bankruptcy, it listed $613 billion in liabilities.

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Preferred Stocks Perform Worst

October 29, 2008

The Winans International Preferred Stock Index shows that preferred stocks have dropped 37% over the last two years. The loss has returned the index to its 1985 level and is much larger than the drop in the Dow Jones Corporate Bond Index. In the last year the index value has dropped nearly 27%. The loss in value illustrates the downside risk associated with these investments.

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Research Shows Morgan Keegan Misrepresented Risk

October 27, 2008

A research paper by former SEC economist Dr. Craig McCann reveals that several RMK funds formerly managed by Morgan Asset Management claimed that many of the funds underlying securities were riskier than portrayed. Dr. McCann found that many of the funds’ recent losses were caused by low-quality, high risk, and obscure securities that the average investor would be unable to discern. McCann’s research found many of the underlying holdings in foreign markets. Dr. McCann’s funded the research effort internally.

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US To Take Some Ownership of Banks

October 14, 2008

In the latest move by the federal government to ward off continuing economic trouble, the treasury announced a bank rescue plan that will purchase $250 billion in preferred bank stock. The move is intended to prevent a liquidity crisis by encouraging banks to make loans in hopes of preventing a liquidity crisis. The plan invests half of the $250 billion in the nine largest banks in the country and the other half is available to regional banks and any bank that receives government investment will have to agree to limit executive compensation. To further encourage liquidity, the Federal Reserve will also being buying commercial paper from companies with adequate credit ratings.

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RMK Multi-Sector Receives Non-Compliance Notice

October 7, 2008

The RMK Multi-Sector High Income Fund, once managed by Jim Kelsoe, received notice from the New York Stock Exchange that it was not in compliance with the exchange’s requirement that a security maintain an average price above $1 over a thirty day period. The fund managers have six months to cure the price ‘deficiency’ and the fund will remain on the exchange throughout this period.

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Bailout Plan Finalized

October 3, 2008

The House of Representatives voted in favor of the $700 billion bailout package, already approved by the Senate, which became law with the President’s signature. The bill authorized the Treasury to begin buying troubled securities and also raised the amount of savings per account insured by the Federal Deposit Insurance Corporation to $250,000 from $100,000. The legislation was constructed based on Treasury Secretary Henry Paulson and Fed Chairman Ben Bernake’s advice that the American economy was on the verge of collapse and that intervention was required to stabilize the financial markets.

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U.S. Stock Futures Slide as Rescue Plan Stalls; WaMu Tumbles

September 26, 2008

U.S. stock-index futures tumbled after the government's $700 billion financial rescue plan stalled in Congress and Washington Mutual Inc. was seized in the largest bank failure in the nation's history.

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AIG Bailed Out for $85 Billion

September 17, 2008

The Federal Reserve took action and purchased 80% of American Insurance Group, the nation's largest insurance company, in order to prevent the firm's collapse. AIG had previously earned attention for its $18 billion in losses in the last year. The company insures $441 billion in fixed income investments throughout the world and the Fed contends that failures related to those holdings would cause drastic repercussions throughout the financial markets. At the time of the takeover AIG shares were trading for a little above $2 a share, down from over $70 in October 2007.

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Major Financial Institutions Tumble

September 15, 2008

The continuing financial crisis stemming from bad mortgages and real estate investments claimed two more major victims this past weekend.  Lehman Brothers announced it would file for Chapter 11 bankruptcy in New York signaling the end of the company’s attempts to find a buyer.  The filing marks the largest failure of an investment bank in nearly two decades.

Bank of America purchased Merrill Lynch for $50 billion as Merrill Lynch executives feared further repercussions in the financial markets following Lehman’s struggles.  The $50 billion price tag represents a considerable drop in value for the investment bank that was estimated to be worth $100 billion in 2007.

Analysts are not convinced that the financial crisis has ended, and many are looking at AIG or Washington Mutual expecting further contractions.

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Fannie Mae and Freddie Mac Placed in Conservatorship

September 7, 2008

The federal government announced a bailout plan for Fannie Mae and Freddie Mac, the government backed mortgage giants, that will place the companies into conservatorship, ideally protecting them from continued major losses due to continuing trouble in the mortgage markets. The arrangement, designed by Treasury Secretary Paulson, and similar to a bankruptcy, calls for reorganization and new management for both companies. Paulson stressed that the government rescue was necessary as a failure for either company could result in tumultuous markets throughout the world.

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UBS General Counsel Resigns amid Probe

August 4, 2008

The General Counsel for UBS, David Aufhauser, quit his post at the Zurich-based investment bank. Aufhauser is one of seven executives mentioned by the lawsuit filed by the New York Attorney General on July 24. The suit alleges that the executives shed $21 million in personal auction rate security investments while the investment bank was promoting the products to individual investors.

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Hyperion Brookfield Announces New Pricing Policies

August 1, 2008

Hyperion Brookfield, the new manager of several Regions Morgan Keegan Bond mutual funds, has announced new pricing policies. The company announced that fund holders will notice a drop in net asset values on July 31st reflecting the change in procedure. Hyperion Brookfield notes that additional pricing changes may be possible. The effected funds are the RMK Advantage Income Fund, the RMK High Income Fund, the RMK Multi-Sector High Income Fund, the RMK Strategic Income Fund, the Regions Morgan Keegan Select High Income fund, the Regions Morgan Keegan Select Short Term Bond Fund, and the Regions Morgan Keegan Select Intermediate Bond Fund.

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Citigroup Subpoenaed in Continuing ARS Probe

August 1, 2008

Citigroup Inc. announced in an SEC filing that it has received subpoenas from state, federal, and industry regulators relating to sales of auction rate debt. Citigroup acted as the primary dealer for about $72 billion in auction rate securities, often buying unsold securities, until the market froze in February. Regulators in several states, including Massachusetts, New York, and Texas, are responding to complaints from individual investors who were sold auction debt as a suitable cash alternative.

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House Financial Services Committee to Hold Auction Rate Security Hearing

July 31, 2008

House Financial Securities Committee chairman Barney Frank intends to ask auction rate security issuers, regulators, and investors to testify before his committee. The September 18 hearing will probe how the $330 billion auction rate securities market collapsed and how participating firms are compensating investors. UBS, Merrill Lynch, Bank of America, Wachovia, and Citigroup are all currently under investigation from state and federal regulators.

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Merrill Lynch Accused of Fraud by Massachusetts

July 31, 2008

Massachusetts Secretary of State William Galvin is suing Merrill Lynch & Co. over its auction rate security practices. In a statement, Galvin said that the investment bank aggressively marketed the securities while encouraging research analysts to downplay the known risks in the market. Galvin noted that Merrill’s auction rate investors were the last to know about the trouble in the market. Merrill joins a host of other major investment banks charged with violations in their marketing and sales of auction rate securities.

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UBS Adds $1 Million to Settlement to End AG Investigation

July 30, 2008

UBS will pay an additional $1 million to the State of Massachusetts on top of the $35 million it has already agreed to pay to municipalities and other authorities throughout the state. Massachusetts Attorney General Martha Coakley was pleased with the settlement noting that the primary goal was to refund cities and towns the money they had invested with UBS. The settlement closes the Massachusetts AG probe into whether UBS provided accurate guidance to municipal officials about whether auction rate securities were suitable.

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Hyperion Brookfield Asset Management Assumes Control of Morgan Keegan Funds

July 29, 2008

After being hit hard by troubles in the mortgage and credit markets, several Regions Morgan Keegan mutual funds have changed their management. The RMK Advantage Income Fund, the RMK High Income Fund, the RMK Multi-Sector High Income Fund, the RMK Strategic Income Fund, the Regions Morgan Keegan Select High Income Fund, and the Regions Morgan Keegan Select Intermediate Bond Fund, previously managed by Morgan Asset Management will be managed by Hyperion Brookfield effective July 29.

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Texas to Consider Suspending UBS

July 24, 2008

Securities regulators for the state of Texas have scheduled a September hearing to decide whether to suspend UBS AG’s broker-dealer and financial services divisions. Officials cite complaints from investors that the investment bank misrepresented or omitted key information when marketing and selling auction rate securities. The Texas State Securities Board is also considering administrative fines and cease and desist orders.

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NY Attorney General Files Suit Against UBS

July 24, 2008

NY Attorney General Andrew Cuomo brought charges against UBS relating to its marketing of auction rate securities. Similar to the suit filed against UBS in Massachusetts, Cuomo alleges that UBS undertook an ‘aggressive marketing campaign’ to push auction rate bonds onto individual investors. The firm’s promotion of auction rate securities was called ‘fraudulent.’ Cuomo notes that even as the auction market began to crumble, UBS continued to sell the investments, and bank executives managed to shed some $21 million in personal holdings. The Attorney General also mentioned that the investment bank’s July 16 offer to buy back $3.5 billion in auction-rate preferred shares is insufficient.

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Lawsuit Dropped Over Citigroup Falcon Tender Offer

July 23, 2008

Investors dropped a class action suit against Citigroup’s Falcon Strategies hedge fund that was seeking information on Citigroup’s offer to redeem Falcon shares. A U.S. District Judge rejected the investors’ bid to halt the investment bank’s repurchase offering. The Falcon fund has lost 80 percent of its value since its inception and investors who purchased shares at a $1 initial value have been offered redemptions at 45 cents per share. Those involved in the lawsuit sought more information on the redemption offer, claiming they could not value their holdings due to misleading and omitted information from Citigroup Alternative Investments in the offering memorandum. Despite the lawsuit, investors are still unable to determine the actual value of the shares they hold.

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Regions Cuts Dividend

July 22, 2008

Regions Financial Corporation announced its plans to cut its dividend payment from 38 cents per share to 10 cents per share, a 74 percent reduction. The company says the steps were taken to save money and strengthen its capital ratios ‘after careful consideration of the effects of the current real estate credit cycle.’ Regions reported a net income of $206.4 million, a drop of nearly $250 million from the same quarter last year.

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Investors Sue Bank of America for Auction Rate Security Practices

July 18, 2008

A class action lawsuit was filed against Bank of America concerning the firm’s marketing of auction rate securities. The suit, pending in Illinois, alleges that Bank of America failed to disclose the true nature of auction rate securities. Among other omissions, Bank of America did not tell investors that auction securities were not suitable cash alternatives, that any apparent liquidity was maintained by firms like Bank of America, and that the firm was planning to withdraw its support of periodic auctions. Bank of America joins several other major investment firms who improperly marketed auction rate securities to investors.

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Wachovia Raided in Ongoing Auction Rate Securities Investigations

July 17, 2008

Wachovia's St. Louis corporate headquarters were searched by government officials as part of an ongoing examination of the company's sales, marketing, and internal evaluations of auction rate securities. It is estimated that $218 billion remain frozen in the auction market and Missouri officials have received over 70 complaints concerning frozen funds and the resulting inability to run businesses or pay tuitions. The team of regulators represented investigations from five states and served over a dozen subpoenas to Wachovia executives and agents.

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Regions Bank Case Moves to Federal Court

July 11, 2008

In a move intended to delay justice, Defendant Regions Bank removed a securities fraud case filed by Levin Papantonio to a Louisiana Federal Court.

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UBS Charged with Fraud for Sales of Auction Rate Securities

July 06, 2008

William Galvin, the Massachusetts Secretary of the Commonwealth, brought charges against UBS Securities LLC and UBS Financial Services Inc. accusing fraud and dishonest conduct. The charges relate to the financial company’s selling of auction rate securities to individual investors. The complaint specifically notices that UBS was clearing its own auction rate securities at the same time that it ramped up sales to its customers. Mr. Galvin released a statement saying that: “The game was fixed; only the customers were in the dark.”

The Massachusetts investigation uncovered a series of emails among UBS insiders stressing the importance of shedding the securities before they became illiquid. The global head of fixed income distribution, David Shulman, wrote an email in mid-December saying that “we need to move this paper and have to explore all angles possible…. We need to do this as quickly as possible.” The emails betray the bank’s priorities, namely protecting its own pockets at the expense of its customers.

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Ex-Bear Stearns Fund Managers Indicted for Fraud

June 19, 2008

Two former Bear Stearns managers have been arrested in connection with the failure of a hedge fund that bet heavily on subprime mortgages.

Matthew Tannin was taken into custody outside his New Jersey home on Thursday, while Ralph Cioffi was arrested at his New York City home. They became the first executives to be criminally charged in the wake of the sub-prime market collapse. An FBI official strongly condemned the practice of the executives, saying they had "prostituted their client trust in order to salvage their personal wealth".

Since the beginning of March, over 400 people have been arrested in a Justice Department crackdown on US mortgage fraud in a sting dubbed "Operation Malicious Mortgage".

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Citigroup Hedge Fund Manager Departs

May 21, 2008

Reaz Islam, a twelve year veteran of Citigroup, and the manager of the Falcon Hedge Funds, is leaving the firm. Citigroup did not give a reason, but undoubtedly the massive drops in the value of the Falcon and MAT Five Hedge Funds managed by Citigroup Alternative Investments spurned Mr. Islam’s departure. The Falcon funds have dropped in value by more than 75 percent.

Citigroup recently began marketing its hedge funds to individual investors advocating the funds’ stability and liquidity. Unfortunately, both the MAT Five and Falcon were highly leveraged funds with heavy concentrations in residential mortgages and other debt instruments. When subprime securities began failing, both funds’ value dropped dramatically, and Citigroup has since offered to bail investors out at prices considerably less than they paid.