Posted On: April 16, 2010

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

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.

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Posted On: April 1, 2010

Broker and Investment Author Bambi Holzer Facing Complaints for the Sale of Provident Shale Royalties 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).

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