Investor Alert
FINRA Fines Morgan Stanley $1 Million and Orders Restitution of $371,000 for Excessive Markups and Markdowns
WASHINGTON - November 10, 2011 - The Financial Industry Regulatory Authority (FINRA) announced today that it has fined Morgan Stanley & Co. Inc. and Morgan Stanley Smith Barney LLC $1 million and ordered $371,000 in restitution and interest to customers for excessive markups and markdowns charged to customers on corporate and municipal bond transactions, and related supervision violations.
FINRA found that Morgan Stanley charged markups and markdowns ranging from below 5 percent to 13.8 percent on corporate and municipal bond transactions, which were higher than warranted given factors including market conditions, the cost of executing the transactions and the value of the services rendered to the customers.
To have a free consultation about your legal rights:
Call now to (954) 961-0096 to speak with securities fraud attorney Mark A. Tepper or email askmark@marktepper.com.
SEC charges Morgan Stanley with securities fraud
Dow Jones MarketWatch has reported that the Securities and Exchange Commission has charged Morgan Stanley Investment Management with violations of securities laws. According to the report, the charges stemmed from a scheme that charged a fund and its investors for advisory services they never got. MarketWatch goes on to report that an investigation uncovered that Morgan Stanley, as the primary investment adviser to The Malaysia Fund told investors and the fund's board of directors that it was using a sub-adviser to give advice and do research. However, the sub-adviser did not provide the promised services even as the fund annually renewed the contract at an eventual cost of $1.845 million to investors.
read more on the story here.
To have a free consultation about your legal rights:
Call now to (954) 961-0096 to speak with securities fraud attorney Mark A. Tepper or email askmark@marktepper.com.
FINRA Orders Chase to Reimburse Customers $1.9 Million for Unsuitable Sales of UITs and Floating-Rate Loan Funds
FINRA Also Fines Chase $1.7 Million
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has ordered Chase Investment Services Corporation to reimburse customers more than $1.9 million for losses incurred from recommending unsuitable sales of unit investment trusts (UITs) and floating rate loan funds. FINRA also fined Chase $1.7 million.
FINRA's investigation found that Chase brokers recommended the purchase of UITs and floating rate loan funds to unsophisticated customers with little or no investment experience and conservative risk tolerances, without having reasonable grounds to believe that those products were suitable for the customers. FINRA also found that Chase failed to implement supervisory procedures to reasonably supervise its sales of UITs and floating rate loan funds.
A UIT is an investment product that consists of a diversified basket of securities, which can include risky, speculative investments such as high-yield/below investment-grade or "junk" bonds. Floating-rate loan funds are mutual funds that generally invest in a portfolio of secured senior loans made to entities whose credit quality is rated below investment-grade, or "junk."
Brad Bennett, FINRA Executive Vice President and Chief of Enforcement, said, "With the growing number of complex products in the market today, it is incumbent upon firms to properly train and provide guidance to their brokers about the products that they sell and supervise the sales practices of their brokers. Chase allowed its brokers to sell risky UITs and floating-rate loan funds without providing them with the training, guidance and supervision necessary to determine whether these products were suitable for their customers, which resulted in losses for Chase's customers."
FINRA found that Chase did not provide its brokers with sufficient training and guidance regarding the risks and suitability of UITs and floating-rate loan funds. Two of the UITs on Chase's list of approved products held a large percentage of assets in closed-end funds that contained a significant percentage of high-yield or junk bonds. Due to their composition, these particular UITs were not suitable investments for customers who had little or no investment experience and a conservative risk tolerance. Chase brokers made almost 260 unsuitable recommendations to purchase these UITs to customers with little or no investment experience and a conservative risk tolerance. The customers suffered losses of approximately $1.4 million as a result of investing in these unsuitable transactions.
Similarly, the floating-rate loan funds sold by Chase were subject to significant credit risks and certain of the funds could also be illiquid. Accordingly, concentrated positions in the funds were not suitable for certain investors with conservative risk tolerances or those seeking preservation of principal. Despite this, Chase brokers recommended the purchase of floating-rate loan funds to customers who had conservative risk tolerances, were seeking preservation of principal or were seeking a highly liquid investment. These customers suffered unreimbursed losses of nearly $500,000 as a result of these unsuitable recommendations.
FINRA's findings also include that WaMu Investments, Inc., which merged with Chase in July 2009, made recommendations to customers to purchase floating-rate loan funds that were not suitable for them, and that WaMu failed to provide adequate training and failed to reasonably supervise the sale of floating-rate loan funds to customers.
In concluding this settlement, Chase neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
This investigation was conducted by Melanie Hilley, Jonathan Golomb, Thomas Kimbrell and Wendy Velez, under the supervision of Bill Park and Joshua Doolittle.
To have a free consultation about your legal rights:
Call now to (954) 961-0096 to speak with securities fraud attorney Mark A. Tepper or email askmark@marktepper.com.
UBS Financial Services has been fined $2.5 Million by FINRA and Ordered to Pay Restitution of $8.25 Million for Omissions That Effectively Misled Investors in Sales of Lehman-Issued 100% Principal-Protection Notes
Washington —The Financial Industry Regulatory Authority (FINRA) has fined UBS Financial Services, Inc., $2.5 million, and required UBS to pay $8.25 million in restitution for omissions and statements made that effectively misled some investors regarding the "principal protection" feature of 100% Principal-Protection Notes (PPNs) Lehman Brothers Holdings Inc. issued prior to its September 2008 bankruptcy filing.
Making the announcement this week, FINRA, the largest independent regulator for all securities firms doing business in the United States, said it found that UBS:
- failed to emphasize adequately to some investors that the principal protection feature of the Lehman-issued PPNs was subject to issuer credit risk;
- did not properly advise UBS financial advisors of the potential effect of the widening of credit default swap spreads on Lehman's financial strength, or provide them with proper guidance on the use of that information with clients;
- failed to establish an adequate supervisory system for the sale of the Lehman-issued PPNs, and failed to provide sufficient training and written supervisory policies and procedures;
- did not adequately analyze the suitability of sales of the Lehman-issued PPNs to certain UBS customers;
- created and used advertising materials that had the effect of misleading some customers about specific characteristics of PPNs
To read the entire news release click here to visit FINRA's website.
To have a free consultation about your legal rights:
Call now to (954) 961-0096 to speak with securities fraud attorney Mark A. Tepper or email askmark@marktepper.com.
FINRA Orders Schwab to Pay $18 Million to Investors for Improper Marketing of YieldPlus Bond Fund
Firm Made Inaccurate Statements and Omitted Material Information About the Fund
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has ordered Charles Schwab & Company, Inc., to pay $18 million into a Fair Fund to be established by the Securities and Exchange Commission (SEC) to repay investors in YieldPlus, an ultra short-term bond fund managed by Schwab's affiliate, Charles Schwab Investment Management. The $18 million consists of the $17.5 million in fees that Schwab collected for sales of the fund, plus a fine of $500,000, both of which will have been designated as restitution to customers.
FINRA's investigation found that despite changes in YieldPlus' portfolio that caused the fund to be disproportionately affected by the turmoil in the mortgage-backed securities market, Schwab failed to change its marketing of the fund. In written materials and in conversations with customers, some Schwab representatives omitted or provided incomplete or inaccurate material information relating to the fund's characteristics, risk and diversification, and continued to represent YieldPlus as a relatively low-risk alternative to money market funds and other cash alternative investments that had minimal fluctuations in net asset value (NAV).
To read the entire news release, visit the FINRA site by clicking here: http://www.finra.org/Newsroom/NewsReleases/2011/P122755
___________
Don’t miss the opportunity to have a free consultation about your legal rights. Call now to (954) 961-0096 to speak with securities fraud attorney Mark A. Tepper or email askmark@marktepper.com.
Morgan Stanley has been fined $800,000 by The Financial Industry Regulatory Authority (FINRA) for Deficient Conflict of Interest Disclosures in Equity Research Reports and Public Appearances by Research Analysts.
Read FINRA's announcement below issued on Tuesday, August 10, 2010:
FINRA Fines Morgan Stanley $800,000 for Deficient Conflict of Interest Disclosures in Equity Research Reports and Public Appearances by Research Analysts
Firm Also Violated 2003 Research Analyst Settlement
WASHINGTON — The Financial Industry Regulatory Authority (FINRA) announced today that it has censured and fined Morgan Stanley & Co., Inc. $800,000 for failing to make public disclosures required by FINRA's rules governing research analyst conflicts of interest. The firm also failed to comply with a key provision of the 2003 Research Analyst Settlement by failing to disclose the availability of independent research in customer account statements.
In addition to the censure and fine, Morgan Stanley must review a sample of its research reports and certify to FINRA that they comply with FINRA's research analyst conflict-of-interest rules. These reviews and certifications must take place every six months for two years.
"This case strikes at the heart of FINRA's research disclosure requirements, which were written in response to scandals involving research analyst conflicts of interest," said James S. Shorris, FINRA Executive Vice President and Acting Chief of Enforcement. "Here, thousands of Morgan Stanley research reports did not include accurate information about the firm's relationships with the companies it covered, depriving potential investors of important information."
FINRA found that from April 2006 to June 2010, Morgan Stanley issued equity research reports that failed to disclose accurate information about the relationships Morgan Stanley, or its analysts, had with companies covered in its research reports. Overall, these inaccuracies resulted in approximately 6,836 deficient disclosures in about 6,632 equity research reports and 84 public appearances by research analysts. Among the deficient disclosures were:
Securities holdings of an analyst, or a member of the analyst's household, in a subject company;
Morgan Stanley's receipt of investment banking and non-investment banking revenue from subject companies;
Morgan Stanley's role as a manager, or co-manager, of a public offering of securities for subject companies;
Morgan Stanley's role as a market maker for certain subject companies' securities; and
Price charts for securities covered in equity research reports and the valuation method used to support published price targets.
Morgan Stanley also did not disclose in approximately 127,600 monthly account statements sent to customers from August 2007 to February 2008 that it had available independent, third-party research. The requirement to provide customers with this notification was part of the Securities and Exchange Commission's final agreement with Morgan Stanley as part of the 2003 Research Analyst Settlement and was incorporated into a separate agreement with FINRA.
In determining the appropriate sanctions in this matter, FINRA considered Morgan Stanley's self-review and self-reporting of some of its disclosure violations and remedial steps taken by the firm, as well as a prior FINRA settlement in 2005 that found the firm violated FINRA's research analyst disclosure rules.
In settling this matter, Morgan Stanley neither admitted nor denied the charges, but consented to the entry of FINRA's findings.
Investors can obtain more information about, and the disciplinary record of, any FINRA-registered broker or brokerage firm by using FINRA's BrokerCheck. FINRA makes BrokerCheck available at no charge. In 2009, members of the public used this service to conduct 18.5 million reviews of broker or firm records. Investors can access BrokerCheck at www.finra.org/brokercheck or by calling (800) 289-9999.
FINRA is the largest independent regulator for all securities firms doing business in the United States. FINRA is dedicated to investor protection and market integrity through effective and efficient regulation and complementary compliance and technology-based services. FINRA touches virtually every aspect of the securities business – from registering and educating all industry participants to examining securities firms, writing and enforcing rules and the federal securities laws, informing and educating the investing public, providing trade reporting and other industry utilities, and administering the largest dispute resolution forum for investors and registered firms. For more information, please visit www.finra.org.
To have a free consultation about your legal rights: Call now to (954) 961-0096 to speak with securities fraud attorney Mark A. Tepper or email askmark@marktepper.com.
HSBC Fined for Unsuitable Sales of Inverse Floating Rate CMOs
The Financial Industry Regulatory Authority (FINRA) has fined HSBC for Unsuitable Sales of Inverse Floating Rate CMOs to Retail Customers and Related Supervisory Failures.
An announcement from the regulator said it had fined HSBC Securities (USA) Inc. $375,000 for recommending unsuitable sales of inverse floating rate Collateralized Mortgage Obligations (CMOs) to retail customers.
According to FINRA, HSBC failed to adequately supervise the suitability of the CMO sales and fully explain the risks of an inverse floating rate or other risky CMO investment to its customers.
A CMO is a fixed income security that pools mortgages and issues tranches with various characteristics and risks. CMOs make principal payments throughout the life of the security with the maturity date being the last date by which all of the principal must be returned. The timing of the return of principal payments can vary depending on interest rate changes.
One of the more risky CMO tranches is the inverse floater, a type of tranche that pays an adjustable rate of interest that moves in the opposite direction from movements of an interest rate index, such as LIBOR. Since 1993, FINRA has advised firms that inverse floating rate CMOs "are only suitable for sophisticated investors with a high-risk profile."
To have a free consultation about your legal rights: Call now to (954) 961-0096 to speak with securities fraud attorney Mark A. Tepper or email askmark@marktepper.com.
Securities Fraud Attorney Mark A. Tepper has begun investigating the Schwab Yield Plus Select Fund (NASDAQ: SWYSX) and Schwab Yield Plus Fund (NASDAQ: SWYPX), following inquiries from investors who sustained losses in the Schwab Yield Funds.
Charles Schwab (NASDAQ: SCHW) is accused in a number of proposed class actions of misleading investors by describing the Yield Plus Fund in prospectuses as only "marginally" riskier than cash.
Investors in the Schwab Yield Plus Funds who believe that instead of a money market fund they received a mutual fund concentrated in speculative, risky mortgage backed securities and should seek legal advice about their rights.
Investors who lost money in Schwab Yield Plus Funds and who wish discuss all of their legal options including the possibility of filing an individual arbitration claim should contact attorney Mark A. Tepper for a free consultation regarding your legal rights and remedies. If you had any type of broker problems, you should consult an attorney for advice.
Click here to email askmark@marktepper.com to confer with Mark A. Tepper about Securities Fraud or telephone our office for your free consultation at (954) 961-0096).
Mark A. Tepper, Esq., has represented numerous individuals who had, and currently have, securities fraud claims. If you want an experienced securities fraud lawyer, Click here to Contact Us to ask Mark Tepper About Securities Fraud or telephone our office for your free consultation at (954) 961-0096).
IF YOU WISH TO DISCUSS YOUR INVESTMENT PROBLEM Contact Us to Ask Mark Tepper About Securities Fraud , phone us at (954) 961-0096 for a free consultation or email us directly at askmark@marktepper.com
The following links will provide information to investors:
To check your broker's history, visit the FINRA BrokerCheck site by clicking here http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/
Avoiding Scams, an article published by FINRA, outlines and explains the most common and widespread securities frauds: http://www.finra.org/Investors/ProtectYourself/InvestorAlerts/FraudsAndScams/P118010
NASD Hearing Panel Fines American Funds Distributors $5 Million for Directed Brokerage Violations NASD News Release
Stock Spams and Scams NASD Investor Information
Analyzing Analyst Recommendations (from the Securities & Exchange Commission)
Investor Alerts & Tips from the North American Securities Administrators Association (NASAA)
TO SPEAK WITH ONE OF OUR STAFF MEMBERS, CALL (954) 961-0096 NOW!
