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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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NASD Regulation

Morgan Stanley Fined Over Failure to Produce E-mails in Arbitrations

Morgan Stanley was fined $3 million and forced to pay $9.5 million in restitution to arbitration Claimants as a result of its failure to produce emails in response to document requests in arbitrations with customers.  According to the FINRA press release, Morgan Stanley incorrectly represented in the arbitration proceedings that “the destruction of the firm’s email servers in the Sept. 11, 2001 terrorist attacks on New York’s World Trade Center resulted in the loss of all pre-9/11 email.”

The unknown at this point is the amount of financial benefit gained by Morgan Stanley by this behavior through arbitration settlements and awards, and whether this benefit far exceeds the relatively small punishment ordered by FINRA.

Posted by W. Scott Greco on 11/02/07.
ArbitrationBrokerage FirmsMorgan StanleyFINRANASD RegulationPermalink

Suitability of Hedge Funds

Hedge funds are largely unregulated investment funds which are typically limited to investment by accredited investors, i.e. high net worth individuals, pension funds, and other institutional investors.  These funds are not restricted by many of the regulations and disclosure requirements of mutual funds, and they have evolved into a widely diverse industry investing in an array of traditional and non-traditional investments. 

As set out in the NASD Notice to its Members linked below, the NASD / FINRA has expressed its concern regarding the sale of hedge funds by its representatives to retail customers.  The Notice emphasizes that the risks and disadvantages associated with hedge funds must be fully disclosed to retail customers, and the sales representative or member must use due diligence to investigate the fund and must make a customer specific determination of suitability for the customer?s situation.
NASD Notice to Members

Posted by W. Scott Greco on 08/16/07.
Hedge FundsNASD RegulationSuitabilityPermalink

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 W. Scott Greco on 07/20/07.
Life SettlementsNASD RegulationViaticalsPermalink

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

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 W. Scott Greco on 07/20/07.
Brokerage FirmsMerrill LynchNASD RegulationPermalink

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 W. Scott Greco on 07/20/07.
Brokerage FirmsCitigroupNASD RegulationRetirementSuitabilityPermalink

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