Stock Attorneys Blog

Earlier this month the Montana Commissioner of Securities sued Securities America and some of its executives over the sale of Medical Capital, a failed private placement accused of being a Ponzi scheme. Montana is the second state to sue Securities America on its sale of these risky and speculative investments. See Massachusetts Securities Regulators Have Sued Securities America, Inc. for Securities Fraud.

According to the Montana Order, Securities America was the placement agent for the sale of Medical Capital and sold nearly 40% of the total Medical Capital notes nationwide since 2003, amounting to a total of $697 million. The Order alleges that due diligence analyst reports were issued each year warning Securities America about a number of material risks concerning the Medical Capital investments and “strongly recommended” that investors be provided with a disclosure of those risks. According to the Order, “Securities America concealed these risks” and “withheld material information regarding heightened risks associated with the [Medical Capital] promissory notes” from its brokers and clients. These risks included Medical Capital’s lack of audited financials.

Continue reading "Montana Regulator Sues Securities America over Medical Capital" »

Blum & Silver, LLP is representing investors who were recommended and sold ProShares Funds and other ETFs by their brokers. These funds have subjected investors to substantially more risk than was disclosed and resulted in enormous losses by investors. These leveraged ETFs include but are not limited to the following ProShares Funds in which investors have suffered substantial losses:

o ProShares UltraShort Russell MValue ETF (SJL)
o ProShares UltraShort Russell 2000 (SKK)
o ProShares UltraShort Real Estate ETF (SRS)
o ProShares Ultra Financials ETF (UYG)
o ProShares UltraShort Dow 30 ETF (DXD)
o ProShares UltraShort Financials ETF (SKF)
o ProShares UltraShort FTSE/Xinhua 25 ETF (FXP)
o ProShares UltraShort Gold ETF (GLL)
o ProShares UltraShort DJ-AIG Crude Oil ETF (SCO)
o ProShares UltraShort Oil & Gas ETF (DUG)
o ProShares UltraShort MSCI Emerging Markets

Continue reading "Blum & Silver Representing Investors in ProShares and other Exchange Traded Funds (ETFs)" »

Blum & Silver, LLP is pleased to announce that Managing Partner, Scott L. Silver, was named to Florida Trend magazine’s 2010 Florida Legal Elite, a select group comprising of the top 1.8% percent of lawyers practicing in Florida. The lawyers listed exemplify a standard of excellence in their profession and by doing so have received endorsement from their colleagues in voting for the 2010 Florida Legal Elite.

All in-state members of the Florida Bar were invited to participate in the selection of the Legal Elite. These lawyers were asked to name attorneys whom they hold in the highest regard or would recommend to others.

Each lawyer was given a score based on the number of votes received: one point for votes from within their firm or three points for votes from outside their firm. The list of top vote recipients was further examined using membership status and histories provided by the Florida Bar. A panel of previous Legal Elite winners, representing different practice areas in cities across the state, reviewed the selection process and the list of finalists.

For more information, the entire report is available at: http://www.floridatrend.com/law_elite.asp

Continue reading "Scott L. Silver, Esq. Selected for Florida Trend’s 2010 Florida Legal Elite" »

The Securities and Exchange Commission (SEC) is reviewing how financial companies market principal protected notes (PPNs), according to Bloomberg news. The SEC's inquiry is focused on how companies describe the products' risks and whether the term "principal protected" is misleading and implies that the investment is guaranteed not to fall in value.

UBS had sold more than $1 billion of PPNs, described as safe investments backed by Lehman Brothers that were "guaranteed" against loss of principal. Au contraire, following Lehman Brothers' bankruptcy filing on September 15, 2008, the PPNs are now in default causing the holders of these PPNs to become senior unsecured creditors in the Lehman bankruptcy proceeding. Practically speaking, these investors are left with virtually worthless investments.

PPNs have reemerged after losing much of their appeal during the time of the Lehman Brother collapse. The SEC's delve into the sales and marketing practices of PPNs is a likely an attempt to ensure that investors are not lulled again with a false sense of security associated with these products.

Continue reading "SEC Looking at the Sale of Principal Protected Notes" »

The United States Securities Exchange Commission (SEC) today brought a securities fraud action against Goldman Sachs and one of its vice presidents, accusing them of misstating and omitting key facts about a financial product tied to subprime mortgages it sold as the housing market was showing signs of distress.

The financial product at issue is a synthetic collateralized debt obligation (CDO) called ABACUS 2007-ACI, which was tied to the performance of subprime residential mortgage-backed securities. ABACUS was structured and marketed by Goldman Sachs.

According to the SEC’s complaint, Goldman Sachs failed to disclose material information about the CDO, specifically that a major hedge fund had taken a short position against the CDO (meaning it gained to benefit if the underlying mortgages defaulted) and that this same hedge fund was also involved in the portfolio selection for the CDO. In other words, Goldman Sachs did not disclose the hedge fund manager’s role in the portfolio selection process or its conflicted interest. To the contrary, Goldman Sachs told investors in ABACUS marketing materials that the CDO would be selected by an independent manager.

According to the SEC, investors in the ABACUS mortgage securities are alleged to have lost more than $1 billion.

Continue reading "SEC Brings Securities Fraud Action against Goldman Sachs in Connection With the Creation and Sale of Subprime CDOs" »

Hightower Securities, a high-end broker-dealer that promotes itself as putting its clients first, is facing litigation over the sale of notes into a feeder fund for a $1.2 billion Ponzi scheme.

Curtis Lyman, a Hightower broker based out of its Palm Beach Gardens, Florida branch, sold investors millions of dollars in promissory notes issued by Banyon, LLC. The investments were described as low-risk, high-return investments in legal settlements. To the contrary, these legal settlements were fabricated by notorious Ponzi schemer and disbarred Florida attorney Scott Rothstein, who has plead guilty to the largest investment fraud in South Florida’s history. In November 2009, the Banyon notes went into default after Rothstein’s Ponzi scheme imploded.

Investors allege that Lyman and Hightower breached their fiduciary duties by recommending the Banyon investments, and were negligent in their due diligence of the investments, despite glaring red flags. Banyon was controlled by George Levin, who was previously involved with a company which pled guilty to felony mail fraud and subsequently involved with another company which engaged in fraudulent transfers. In addition, Banyon’s Chief Financial Officer, Frank Preve, was convicted of felony bank embezzlement in the 1980’s.

Continue reading "Hightower Securities’ Broker Curtis Lyman Allegedly Sold Banyon Notes Tied to Scott Rothstein Ponzi Scheme" »

Wedbush Morgan broker Bambi Holzer, whose employment background is filled with customer complaints for the sale of variable annuities, is now facing new complaints for the sale of Provident Shale Royalties private placement investments. Provident has been accused of being a Ponzi scheme by the Securities and Exchange Commission.

Both private placements and variable annuities products are high commission products, which raises concern whether brokers are recommending these products in the best interests of their clients, or whether the brokers are putting ahead their own financial interests. Provident private placements paid commissions of approximately 6% to 10%, which significantly exceeds commissions earned on more traditional investment products.

Ms. Holzer is currently a registered representative of Wedbush Morgan Securities, Inc. and Sequoia Securities Corp. According to her website, she has appeared on several network television shows such as the Today Show, NBC, CNN, CNBC, Bloomberg and has authored numerous retirement planning and investment books. However, it is not mentioned on Ms. Holzer’s website that her employment record reflects 42 settled customer disputes, violations of firm policy at other brokerage firms and regulatory suspension and fines based on her misconduct (according to FINRA BrokerCheck).

Continue reading "Broker and Investment Author Bambi Holzer Facing Complaints for the Sale of Provident Shale Royalties Ponzi Scheme" »

Today the Financial Industry Regulatory Authority (FINRA) announced that it has expelled Provident Asset Management, LLC, the affiliate broker-dealer of Provident Shale Royalties that marketed the fraudulent Ponzi scheme private placement investments.

FINRA proclaims it is actively investigating other broker-dealers involved in the sale of Provident and other private placement interests. FINRA is looking at firms’ compliance with suitability, supervision and advertising rules, as well as potential instances of fraud.

“While the private placement market is an important source of capital for many companies, the market is also one in which investors have been subject to unsuitable or abusive sales tactics," stated Susan L. Merrill, FINRA Executive Vice President and Chief of Enforcement.

Continue reading "FINRA Expels Provident Asset Management and is Investigating Other Provident Selling Broker-Dealers " »

The Financial Industry Regulatory Authority (FINRA) announced its first enforcement action involving the sales of reverse convertible notes (RCNs) — fining H&R Block Financial Advisors, Inc., (n/k/a Ameriprise Advisor Services, Inc.) $200,000 for failing to establish adequate supervisory systems and procedures for supervising sales of RCNs to retail customers. FINRA also fined and suspended H&R Block broker Andrew MacGill for making unsuitable sales of RCNs to a retired couple. The firm was ordered to pay $75,000 in restitution to the couple for losses they incurred.

At the same time, FINRA released an Investor Alert, Reverse Convertibles - Complex Investment Vehicles, to educate retail investors about how these products work, what risks they involve and what factors to consider before investing in an RCN. FINRA also issued Regulatory Notice 10-09, reminding firms of their sales practice obligations when recommending or selling RCNs to retail investors.

An RCN is a structured product that typically consists of a high-yield, short-term note of an issuer and effectively a put option that is linked to the performance of an unrelated, or "linked," asset - usually a single common stock, but sometimes a basket of stocks, an index or some other asset. As a general rule, upon maturity of an RCN, the investor will receive either his full principal investment or a predetermined number of shares of the linked equity (which may be worth less than the principal investment), depending on the performance of the linked equity. Generally speaking, the higher the coupon rate, the higher the expected volatility of the linked equity and the greater the likelihood of the investment resulting in payment of shares. Reverse convertibles not only come with the risks that fixed income products ordinarily carry, such as issuer default and inflation risk, but with additional risks of the underlying asset, which can depreciate or even become worthless. The initial investment for most RCNs is $1,000 per unit and most RCNs have maturity dates ranging from three months to one year.

Continue reading "FINRA Fines H&R Block Financial Advisors for Inadequate Supervision of Reverse Convertible Notes Sales and Issues Guidelines for the Sale of These Products" »

Blum & Silver, LLP is currently investigating former financial advisor Michael Joseph DiMare. According to sources, DiMare solicited his clients to invest approximately $2,000,000 in Ponzi schemes and other faux investment opportunities. DiMare started the scheme in 2001, offering investors bogus tax-free corporate bonds that did not exist.

Continue reading "Blum & Silver, LLP Investigates Michael DiMare Losses Against ING and Signator Investors" »

On Tuesday, the Commonwealth of Massachusetts filed a regulatory action against Securities America, Inc., accusing the brokerage firm of committing securities fraud on a massive scale. Specifically, Securities America sold approximately $697 million in promissory notes that were issued by entities wholly owned by Medical Capital Holdings, Inc. ("Medical Capital"). Unfortunately for Securities America's customers and other investors, the notes were part of an alleged Ponzi scheme, Medical Capital has defaulted on more than $1 billion of the notes that it issued. Securities America sold $358 million of those defaulted notes. The United States Securities and Exchange Commission ("SEC") sued Medical Capital several months ago, alleging that Medical Capital was a massive investment fraud, and Medical Capital now lies in an SEC receivership and is the subject of various injunctions and asset-freeze orders.

Similar to at least two nation-wide class-action lawsuits and dozens of FINRA securities arbitration claims that have been filed against Securities America, the Massachusetts complaint alleges that Securities America failed to conduct proper due diligence of Medical Capital or ignored red flags or which it was aware and made "material omissions and misleading statements" in the course of the sale of approximately $697 million of promissory notes to Medical Capital investors.

The Massachusetts complaint states "...all material risks and information regarding MC Notes were not disclosed to investors. These risks were known to [Securities America]. Year after year, the due diligence analyst, retained by [Securities America] to conduct a review of the various Medical Capital offerings, specifically requested and at many times pleaded that investors be informed of certain heightened risks."

Continue reading "Medical Capital Investor Alert: Massachusetts Securities Regulators Have Sued Securities America, Inc. for Securities Fraud" »

The court-appointed receiver for the Medical Capital fraud filed his sixth status report on January 11, 2010. As with the receiver’s earlier reports, this report outlines the various fraudulent aspects of the Medical Capital entities. The report also reveals the unchanging fact that investors are unlikely to recover much money from the receivership. Specifically, the report discloses that Medical Capital investors are owed $1.7 billion, which is far greater than the assets available to pay the investors. The receiver’s report further states that Medical Capital’s lending activities were unprofitable beginning with the creation of its first notes, which purportedly were backed by medical receivables.

The report also reveals that Medical Capital was paid administrative fees of more than of $323 million. In other words, more than $323 million of investors’ money went straight into Medical Capital’s coffers. The receiver also reported that: (a) none of the Medical Capital entities ever generated enough profit to pay investors’ principal and interest, and (b) just under $1 billion in loans and assets were transferred among various Medical Capital entities in order to make payments to earlier investors using new investors’ funds. This is a classic example of a Ponzi scheme.

Between the use of new investors’ money to pay earlier investors, “faking” receivables, and fraudulently marking up the value of aged receivables, it appears that investors have lost more than $1 billion and that investors are highly unlikely to recover much of that loss from the receivership. Blum & Silver, LLP continues to file FINRA arbitration claims against the brokerage firms that sold Medical Capital notes to investors. Please contact Blum & Silver if you would like to discuss claims that you may have against the brokerage firm that sold Medical Capital investments to you.