Posted On: November 28, 2010

South Florida brokerage firm targeted in $5 million lawsuit filed by Rothstein trustee

The trustee overseeing the bankruptcy of Scott Rothstein’s defunct law firm has filed a $5 million lawsuit against R.L. Pearson & Associates, a Fort Lauderdale brokerage firm, alleging that the investment firm received commissions in exchange for steering new investors to Rothstein’s billion dollar Ponzi scheme.

While it is not alleged that R.L. Pearson & Associates had knowledge of the Ponzi scheme, the complaint includes allegations that the firm received commissions for introducing new investors to Rothstein during the time frame that Rothstein’s defunct law firm Rothstein, Rosenfeldt, Adler was already financially insolvent. It further alleges that the firm received returns on its own investments in the Ponzi scheme The lawsuit seeks to recover these payments for the ongoing bankruptcy.

R.L. Pearson & Associates was previously named in a $150 million lawsuit filed on behalf of investors to the Rothstein Ponzi scheme, which centered around the sale of forged structured settlement agreements.

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Posted On: November 5, 2010

Investors Continue to Recover from UBS over Lehman Notes in FINRA Arbitration

This week a Financial Industry Regulatory Authority (FINRA) arbitration panel ruled that UBS must buy back a retired couple’s structured notes backed by Lehman Brothers for the original cost of the notes - $529,688. The notes plunged in value when the investment bank collapsed in 2008. According to a recent Reuters article, UBS has been ordered to pay investors some or all of their investment in six of seven FINRA arbitration cases involving Lehman backed structured products. Some of the products were called “100% Principal Protection Notes” and “Return Optimization Securities with Partial Protection.” These notes are now virtually worthless. UBS continued to sell these notes well into 2008. Lehman went bankrupt in September 2008.

These products were supposed to perform like a basket of securities or an index such as the S&P 500. Unlike a stock index or currency basket, however, which could be subject to volatility and big swings, the returns on these investments would be capped, and in exchange for the cap, the investor was supposed to get built-in downside protection.

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Posted On: November 5, 2010

Brewer Investment Group Promissory Note Fraud

The Securities and Exchange Commission (SEC) has charged Brewer Investment Group, LLC (a registered investment adviser), Brewer Financial Services, LLC (a registered broker-dealer), Brewer Investment Advisors, LLC (the parent company) and its top executives with the sale of $5.6 million fraudulent and unregistered promissory notes to 74 of its investors. According to the SEC, notes issued by FPA Limited, an Isle of Man company, were sold by Brewer Investment Group in an attempt to bail out the company from serious financial troubles, a fact that was misrepresented to investors. In fact, the company continued to sell the notes to new investors even after it had been unable to pay the promised interest to previous investors.

In addition, the manner in which the offering proceeds would be used was misrepresented to the investors. The offering materials for the FPA Limited notes failed to disclose to investors that Brewer would disburse 90% of the proceeds at its own discretion, and that the proceeds were being funneled into Brewer’s own company and controlling subsidiaries in order to help alleviate some of the company’s significant financial problems. As a result, the notes were far riskier than what was communicated to investors. Furthermore, the company misrepresented to investors that the investments were secured by collateral.

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