Posted On: September 28, 2011

Blum Law Group Files Claims on Behalf of McGinn Smith Investors Against National Financial Services, LLC

Blum Law Group is pursuing claims against National Financial Services, LLC (“NFS”) for investors who lost money investing over $100 million in more than 20 unregistered debt offerings sold by McGinn, Smith & Co., Inc., (“McGinn Smith”) and other entities under its ownership or control. McGinn Smith was a New York based securities broker-dealer with its principal place of business in Albany, NY. The firm also had many clients in Pennsylvania.

Chief among the investments sold by McGinn Smith were notes issued by four limited liability companies: First Independent Income Notes, LLC., First Equity Income Notes, LLC, First Albany Income Notes, LLC., and Third Albany Income Notes, LLC ( collectively, “Income Notes”). Each of these companies was wholly-owned by an extension of McGinn Smith.

McGinn Smith began using NFS, a Fidelity company, as its clearing firm in or about 2005. Many McGinn Smith clients were required to maintain an account with NFS which provided significant clearing and back office operations for McGinn Smith.

The claims allege, in part, that NFS was negligent in its pricing of the notes and breached duties it owed to the investors in negligently clearing for McGinn Smith.

In April 2010, both the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) filed lawsuits against McGinn Smith and its principals, alleging that from 2003 through April 2010, McGinn Smith committed an ongoing fraud against over 900 investors.

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Posted On: September 22, 2011

Lehman Investor Alert: Continued Findings that UBS Misled Lehman Structured Notes Investors

Lehman Brothers filed for bankruptcy three years ago, leaving investors in Lehman Brothers structured notes with essentially worthless notes. In the last three years, arbitration panels, courts and securities regulators have all recognized that UBS down played the risks associated with Lehman structured notes, including principals protected notes sold to its customers.

In 2009, the New Hampshire Bureau of Securities Regulation filed a cease and desist and order and sought other relief against UBS, alleging unfair sales practice relating to its sale and recommendation of Lehman structured products to New Hampshire investors. Last month UBS settled this matter with the State of New Hampshire, agreeing to pay a fine, investigation costs and an administrative payment.

In 2011, the Financial Industry Regulatory Authority (FINRA) fined UBS $2.5 million and ordered $8.25 million in restitution for UBS’s misconduct in selling Lehman so-called Principal Protected notes. FINRA's settlement with UBS reveals UBS’ improper sales tactics relating to Lehman structured products. Although sanctioning UBS almost $11 million, it provides restitution for only a limited number of customers and specifically holds that investors are free to pursue their claims directly against UBS.

Most recently, a federal judge in New York ruled in a UBS-Lehman class action case that the offering documents that described Lehman’s purported “principal protection” notes were false and misleading. The Court did not accept UBS’s defense that the offering materials contained risk disclosures. The Court ruled that “a misleading statement displayed prominently and in numerous places may not be cured by inconspicuous and scattered warnings.” The court found that the principal protection statements were displayed more prominently and frequently than the warning statements.

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Posted On: September 20, 2011

FINRA Fines Pointe Capital, Inc. (n/k/a JHS Capital Advisors, Inc.) for Excessive Commissions

The Financial Industry Regulatory Authority (FINRA) recently announced it has fined Pointe Capital, Inc. (“Pointe”) of Boca Raton, Florida, $300,000.00 for mischaracterizing a portion of the commission charges as fees for handling services. The fines also include additional violations for inadequate supervisory procedures relating to private placements. Specifically, Pointe charged customers a handling fee as high as $95.00 per trade in addition to a commission.

FINRA has sanctioned other firms for similar misconduct relating to understating commissions:

• John Thomas Financial (“John Thomas”) of New York, New York was fined $275,000.00. John Thomas charged its customers a handling fee as high as $75.00 per trade in addition to a commission; and

• First Midwest Securities, Inc. (“First MidWest) of Bloomington, Illinois was fined $150,000.00. First Midwest charged customers a handling fee as high as $99.00 per trade in addition to a commission.

FINRA’s resolution of these matters does not include full restitution for investors charged these handling fees.

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