Articles Posted in For Public Investors

Does the conventional wisdom regarding asset allocation hold up in today’s economy? The New York Times recently featured an article suggesting that a portfolio teeming with risky stocks, derivatives, and other exotic investments may, in fact, not be suitable for even young investors. The Times points out that these young investors experience higher rates of unemployment and are more likely to cash out their 401(k)’s and other investments when they switch jobs. An appropriate suitability analysis under FINRA Rule 2111 would take these factors into account. It is highly likely that many brokers are still using a one-size-fits-all asset allocation formula for their young customers.

Investors may have a variety of claims against such brokers who fail to take into account current market conditions, including unsuitable investment advice, fraudulent misrepresentations and omissions, and failure to supervise.

Below is FINRA’s press release of the $200M restitution order the SEC and FINRA levied on Regions Morgan Keegan (RMK) related to bond funds it misrepresented to investors. Big for investors. We had blogged about this in April 2010 when the SEC charged Morgan Keegan & Company, Morgan Asset Management and two employees with fraudulently overstating the value of securities backed by subprime mortgages. These were the first federal government allegations related to the Regions Morgan Keegan bond funds which lost significant value in 2008. Many law firms around the U.S., including our firm, have been retained by investors who lost money in the Regions Morgan Keegan funds. Big fight will be to get fines into evidence during the pending arbitrations.

Morgan Keegan Ordered to Pay $200 Million to Investors to Settle Allegations Regarding Sales of Bond Funds Sales Materials Made Exaggerated Claims and Failed to Disclose Risks; Supervisory System Failures

WASHINGTON – The Financial Industry Regulatory Authority (FINRA), the Securities and Exchange Commission (SEC) and five state regulators from Alabama, Kentucky, Mississippi, South Carolina and Tennessee announced today that each has settled enforcement proceedings against Morgan Keegan & Company, Inc. Morgan Keegan will pay restitution of $200 million for customers who invested in seven affiliated bond funds, including the Regions Morgan Keegan Select Intermediate Bond Fund (Intermediate Fund). Morgan Keegan’s affiliate, Morgan Asset Management, managed the funds.

Rich & Intelisano recently won a FINRA arbitration award which included $100,000 in punitive damages. The case is Stora, et al. v. Strasbourger, Pearson et al. (FINRA 09-01769). We represented a group of investors who were defrauded by a broker dealer and its registered representatives. Matthew Woodruff of our office tried the matter which included five hearing sessions. The panel awarded the claimants $373,968 in compensatory damages, plus interest. The award is significant because pursuant to the Mastrobuono Supreme Court decision, the panel awarded claimants $100,000 in punitive damages, a rarity in securities arbitrations.

New York Super Lawyers, a publication of The New York Times Magazine, has named Ross B. Intelisano as one of New York’s top Securities Litigation attorneys in their 2010 publication. The list of Super Lawyers recognizes lawyers from more than 70 practice areas who have attained a high degree of peer recognition and professional achievement in their respective fields. Super Lawyers’ selection process is a vigorous multi-phase rating process based on peer nominations and evaluations, combined with third-party research. Their selection process has been recognized by bar associations and courts across the country.

Ross Intelisano is the only attorney on the 2010 New York Super Lawyers top Securities Litigation list who primarily represents institutional and individual investors in securities arbitration.

Sean Coffey has recently embarked on a campaign to become the next Attorney General of New York State. I have never been substantially involved in a political campaign before, but Sean is different. I’ve worked with and known Sean and his prior law firm for many years and I have never been more impressed with a potential candidate for elected office as I am with Sean. He is smart, loyal, strong and possesses all of the qualities needed to be a fantastic Attorney General. Therefore, I’m going to be actively involved in helping Sean become the next Attorney General. And I think he’s going to win. The press is certainly catching on very quickly. Kate Kelley, a very well respected writer for the Wall Street Journal, wrote a great piece about the AG race. Here is the link.

And a snippet from the piece:

“So far, Wall Street isn’t taking much heat from current or potential candidates to succeed Mr. Cuomo.

FINRA announced yesterday that it won approval from the SEC to expand its BrokerCheck service to make records of final regulatory actions against brokers permanently available to the public, regardless of whether the broker continues to be employed in the securities industry.

The FINRA press release states disclosure records for former brokers will be available on BrokerCheck beginning November 30. It goes on to state, “This is an important step for investors and for investor protection,” said FINRA Chairman and CEO Richard Ketchum. “Individuals previously barred by FINRA and other regulators have surfaced in a number of recent frauds in other parts of the financial industry that cost unsuspecting investors millions of dollars. It has never been more critical for investors to research the backgrounds of the financial professionals they deal with than it is today.”

This is an important addition to the publicly available regulatory records of former brokers. Often times, permanently barred brokers, traders and salesmen will attempt to work at unregistered entities such as hedge funds. It is difficult for potential investors to do due diligence on a hedge fund manager without the historical BrokerCheck information. In the past, if a registered representative was out of the business for more than two years, a public investor had no access to the broker’s disciplinary record.

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