CMOs and Mortgage Backed Securities
CMOs, or collateralized mortgage obligations, are bundles of mortgages which are then divided up for sale by investment banks. Different types of these mortgage backed securities can vary widely in risk for investors, but recent problems with the subprime mortgage lending market could portend future problems for individual investors who have been sold these types of securities without their brokers fully explaining the risks involved. As set out in the following linked news stories, customers of Brookstreet Securities and Wedbush Morgan Securities have filed arbitration claims against their brokerage firms related to the sale of CMOs and other mortgage securities.
Wall Street Journal article
Orange County Register Article
Posted by Greco & Greco on 07/20 at 02:21 PM
Brokerage Firms •
Brookstreet •
CMOs •
Suitability •
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Morgan Stanley Fined $250,000 by Rhode Island
The Rhode Island Department of Business Regulation fined Morgan Stanley $250,000 for failing to supervise sales representatives at its Providence, Rhode Island office. According to the Rhode Island press release below, the charges related to the replacement of mutual funds with more expensive mutual funds and variable annuities.
Rhode Island Press Release
Posted by Greco & Greco on 07/20 at 02:16 PM
Mutual Funds •
State Regulators •
Rhode Island •
Variable Annuities •
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Life Settlements
The NASD has issued an Investor Alert regarding the purchase of life settlements, also known as senior settlements. Unlike viaticals, life settlements generally involve the sale of life insurance policies on policyholder individuals who are not terminally ill.
NASD Investor Alert
The National Association of Insurance Commissioners has also issued a statement regarding the risks involved in purchases of such settlements by individuals: it is not a liquid investment, there is no guaranteed rate of return, and you could be responsible for paying the premiums on the policy if the insured’s policy if they do not die within a certain time.
NAIC Statement to Consumers
Posted by Greco & Greco on 07/20 at 01:41 PM
Life Settlements •
NASD Regulation •
Viaticals •
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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 Greco & Greco on 07/20 at 11:29 AM
Brokerage Firms •
Wachovia •
NASD Regulation •
Suitability •
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Merrill Lynch Fine for Supervisory Practices
In the below release, the NASD announced that it had “fined Merrill Lynch, Pierce, Fenner & Smith Inc. $5 million for supervisory failures, registration violations, impermissible sales contests and other violations in connection with the operation of its Financial Advisory Center (FAC) located in Hopewell, NJ and Jacksonville, FL.”
NASD Press Release
Posted by Greco & Greco on 07/20 at 11:22 AM
Brokerage Firms •
Merrill Lynch •
NASD Regulation •
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Early Retirement Pitches
Beware of sales pitches allowing early retirement which are based upon aggressive unrealistic annual returns without disclosure of the risks involved with such an aggressive strategy. As set out in the below NASD Investor Alert, following such a program may result in the depletion of your retirement nest egg if the broker is unable to meet the aggressive advertised annual returns.
NASD Investor Alert
See also the NASD charges against Citigroup regarding early retirement seminars in Charlotte, North Carolina for employees of Bellsouth.
NASD News Release
Posted by Greco & Greco on 07/20 at 11:13 AM
Brokerage Firms •
Citigroup •
NASD Regulation •
Retirement •
Suitability •
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NASAA’s Top Ten Investment Scams
The North American Securities Administrators Association’s (NASAA) has published a top ten list of investment scams, including ponzi schemes, affinity fraud, unlicensed securities sellers, prime bank schemes, and variable annuities sales practices:
NASAA Top Ten Investment Scams.
Posted by Greco & Greco on 07/20 at 11:05 AM
Affinity Fraud •
Ponzi Scheme •
Unregistered Securities •
Variable Annuities •
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