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Securities Fraud Blog

Greco & Greco, P.C.

W. Scott Greco

Fight Investment Fraud

Greco & Greco's lawyers represent investors to recover losses caused by securities fraud, churning, lack of suitability, negligence, sales of unregistered securities, unauthorized trading, and other misconduct by stock brokers, investment advisors, financial planners and their firms.

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Wachovia

Businesses left out of Auction Rate Securities Settlements?

As discussed in this Bloomberg article, the settlements reached by regulators regarding auction rate securities sales with many of the large brokerage firms fail to help medium to large businesses who were also sold ARS.  Although the required buyouts in the settlements with UBS, JPMorgan Chase, Morgan Stanley, and Wachovia Corp. reached $35 billion, this amount only approximates 18% of the $200 billion estimated to be still outstanding. 

Although the settlements call for the firms to use their best efforts to help institutional investors stuck with the frozen ARS, they fall short of requiring a buyback.  This situation may force mid-sized to large companies to seek redress on their own through the arbitration or court system.  Please contact Greco & Greco if your business is holding frozen ARS as a result of fraudulent sales practices of a brokerage firm.

Posted by W. Scott Greco on 08/22/08.
ArbitrationAuction Rate Securities (ARS)Brokerage FirmsCitigroupJ.P. MorganMerrill LynchMorgan KeeganUBSWachoviaState RegulatorsPermalink

Consequential Damages for Auction Rate Securities Unresolved

As set out in this Kansas City Star article Wachovia and JP Morgan Chase have joined UBS, Morgan Stanley, and Citigroup in settling charges related to their sale of Auction Rate Securities.  Although the settlement agreements with exact details are not completed, it appears that the firms will be buying back frozen auction rate securities sold to individuals and small businesses.
Left open is the recovery of consequential damages suffered by buyers of the allegedly liquid ARS who couldn’t access their cash.  The press releases and articles related to the settlements reference that customers will be able to seek recovery of their consequential damages through arbitration, with the firms admitting liability, but not conceding damages. 
If you or your business suffered monetary damages as a result of having your funds frozen in ARS, please contact Greco & Greco for a free consultation with one of our attorneys to discuss options for recovery of your damages.

Posted by W. Scott Greco on 08/21/08.
Auction Rate Securities (ARS)Brokerage FirmsCitigroupJ.P. MorganMorgan StanleyUBSWachoviaPermalink

Auction Rate Securities Failures

Auction Rate Securities and Auction Rate Preferred Securities (ARS) are securities made up of long term bonds or preferred stock with variable interest rates and yields.  The yields are periodically reset through Dutch auctions.  ARS are often marketed and sold by a single dealer with the only resale market being through a successful auction.  Problems have arisen in recent months as a result of the failures of the auctions, leaving investors in the lurch and unable to redeem the security.  As set out in this SmartMoney article, ARS have been marketed as a safe, liquid alternative to money market funds.  Investors believing they had their money in a safe liquid investment are understandably concerned by the failures in the marketplace for these securities, and our firm has been monitoring the situation closely and discussing the matter with concerned individuals and businesses.  Misrepresentations and omissions in the sale of a security can form the basis for a claim for securities fraud as well as other legal claims for recovery of damages.

As recently as 2006, the SEC censured 15 of the largest brokerage firms for sales and auctions of Auction Rate Securities. As stated by the SEC in its press release, “since the firms were under no obligation to guarantee against a failed auction, investors may not have been aware of the liquidity and credit risks associated with certain securities.”  The SEC further stated that “the firms violated Section 17(a)(2) of the Securities Act of 1933, which prohibits material misstatements and omissions in any offer or sale of securities.”  The fifteen firms which were censured were Bear, Stearns & Co., Inc., Citigroup Global Markets, Inc., Goldman Sachs & Co., J.P. Morgan Securities, Inc., Lehman Brothers Inc., Merrill Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated/ Morgan Stanley DW Inc., RBC Dain Rauscher Inc., A.G. Edwards & Sons, Inc., Morgan Keegan & Company, Inc., Piper Jaffray & Co., SunTrust Capital Markets Inc., Wachovia Capital Markets, LLC, and Banc of America Securities LLC.  Read the SEC Order here.

UBS appears to be the first firm to actually begin lowering the values of auction rate securities on its customers’ statements, as reported by many news sources on March 29 including this Reuters article.  Citing a Wall Street Journal article, Reuters reported that the markdowns could exceed 20 percent for some customers.  Additional concessions from other firms may be forthcoming as the first quarter of 2008 ends.

State Regulators, including Massachusetts, have also begun investigations of the auction rate securities market with Massachusetts reportedly issuing subpoenas to UBS, Merrill Lynch, and Bank of America. 

The Financial Industry Regulatory Authority (FINRA) released an Investor Alert on March 31, 2008 regarding auction rate securities which purports to set out various options for investors stuck with these products.  FINRA, which claims to be a “trusted advocate for investors,” notably fails to mention contacting an attorney or filing an arbitration claim as options.  If you are an investor who was sold Auction Rate Securities, and you would like to discuss your legal options with an attorney, please Contact Greco & Greco.

Link to Securities-Lawyers.net Auction Rate Securities page.

Posted by W. Scott Greco on 03/03/08.
Auction Rate Securities (ARS)BondsBrokerage FirmsA.G. EdwardsBanc of AmericaBear StearnsCitigroupDeutsche BankFerris Baker WattsLehman BrothersMerrill LynchMorgan KeeganMorgan StanleyPiper JaffrayRBC Dain RauscherSuntrustUBSWachoviaFINRAState RegulatorsMassachusettsSuitabilityPermalink

Wachovia Fine Related to Fee Based Accounts

Fee based accounts with brokerage firms are typically an alternative to commission accounts in which the account is charged a fixed annual fee or an annual percentage fee based on the assets in the account.  These accounts may not be suitable for all customers.  As set out in the link below, the NASD fined Wachovia for ?failing to adequately supervise its fee-based brokerage business between 2001 through 2004.?
NASD Press Release

Posted by W. Scott Greco on 07/20/07.
Brokerage FirmsWachoviaNASD RegulationSuitabilityPermalink

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