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An article this week in The Wall Street Journal (“Federal Prosecutors Investigating Wells Fargo Over Sales Tactics”) stated that federal prosecutors are in the early stages of an investigation into sales practices at Wells Fargo & Co. – the same sales practices that led to Wells Fargo being slammed with a $185 million fine last week in an enforcement action that was filed by the Office of the Comptroller of the Currency, Consumer Financial Protection Bureau and Los Angeles City Attorney.

The investigation, which is reportedly being conducted by the U.S. Attorney’s Offices for the Southern District of New York and the Northern District of California, could potentially lead to civil or criminal charges being filed against Wells Fargo and/or its executives.

At the center of this new federal investigation are the same allegations that led to last week’s enforcement action which asserted that Wells Fargo had engaged in “widespread illegal” activity which included employees having falsified documents in connection with as many as 2 million accounts having been opened without customers’ knowledge, consent or permission.

If you are an individual or institutional investor who has any concerns about your accounts and/or investments with Wells Fargo, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

Merrill Lynch underwrites, manages and markets the sale of Market-Linked Notes issued by its parent company, Bank of America Corporation, and numerous other unaffiliated banks.

Market-Linked Notes were purportedly recommended by Merrill Lynch financial advisors to customers as a stable source of income. Many investors did not adequately understand or comprehend the extreme risks associated with Market-Linked Notes or how they worked. In many instances, Market-Linked Note investments tracked oil prices, energy pipelines, or commodity baskets and have resulted in significant investor losses.

How do Market-Linked Notes Work?

Merrill Lynch managed Market-Linked Notes to generate greater returns through the use of embedded derivatives designed to track the performance of volatile securities, indices, commodities or currencies. In many instances Market-Linked Notes offered little if any principal protection. Merrill Lynch financial advisors purportedly recommended and/or solicited investments based on the potential returns without properly disclosing the risks associated with Market-Linked Notes.

Merrill Lynch purportedly provides incentives to its financial advisors for the sale of proprietary products, such as Market-Linked Notes issued by affiliated banks. Market-Linked Notes may have substantial fees and/or commissions paid to affiliated companies for banking, underwriting and asset management. Merrill Lynch may have failed to properly explain the risks associated with Market-Linked Notes to investors whose performance and interest crediting is tied to specific securities, commodities, indices or currencies, sometimes with leverage up to 200%.

In June 2016, Merrill Lynch agreed to pay a $10 million penalty to the U.S. Securities & Exchange Commission to settle charges that it was responsible for misleading statements in offering materials provided to retail investors for structured notes linked to a proprietary volatility index.

In June 2012, the Financial Industry Regulatory Authority (FINRA) censured and fined Merrill Lynch $450,000 for sales practice violations related to the sale of Structured Securities Products, referred to as Market-Linked Notes. According to FINRA’s findings in the Letter of Acceptance Wavier and Consent, more than 50% of the 650,000 Structured Securities Product transactions were issued by the parent of Merrill Lynch. FINRA regulators found that there was inadequate supervision of customer accounts to determine whether there were unsuitable levels of concentration in Market-Linked Notes.

Merrill Lynch has underwritten, managed and marketed to its customers billions of dollars in Market-Linked Notes including, for example, the following:

Bank of America – Autocallable Market-Linked Step Up Notes Linked to the S&P Oil & Gas Exploration and Production Select Industry Index Bank of America – Strategic Return Notes
Bank of America – Accelerated Return Notes® Linked to the Merrill Lynch Commodity Index eXtra Precious Metals Plus – Excess Return
Credit Suisse – Accelerated Return Notes®
HSBC USA – Market Index Target Term Securities®
HSBC USA – Capped Leveraged Index Return Notes®

If you are an individual or institutional investor who has any concerns about your accounts and/or investments with Merrill Lynch & Co., Inc., please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

A recent article in The Wall Street Journal (“SEC Readies Case Against Merrill Lynch Over Notes That Lost 95%”) stated that the Securities and Exchange Commission is preparing a civil enforcement case against Merrill Lynch over a structured note investment that fell as much as 95% in value and was marketed in a way that one of the firm’s financial advisers called “borderline crooked.”

“The probe involves a product called Strategic Return Notes that Merrill sold over a number of months in 2010, raising about $150 million. Linked to a Merrill Lynch index tracking the volatility of the S&P 500 stock index, the five-year notes lost value rapidly after they were issued, as market volatility fell and the cost of buying the options upon which the notes were based rose sharply.”

Structured notes are extremely complex securities that are custom-built by banks out of options and other derivatives and are often sold to retail investors.

Wall Street investment banks sell an estimated $40 billion to $50 billion of structured notes each year and they rank among the most common types of securities in arbitration claims filed with the Financial Industry Regulatory Authority (FINRA).

If you are an individual or institutional investor who has any concerns about your accounts and/or investments with Merrill Lynch & Co., Inc., please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

Attorney Mark Maddox wrote an article for the Indianapolis Business Journal this past week on the topic of protecting our retirement accounts.

Here is a link to the article:

http://www.ibj.com/articles/58208-maddox-lets-better-protect-our-retirement-accounts

Attorney Mark Maddox sat on a panel to discuss his work on the FINRA Task Force Report last Friday at the American Bar Association’s 18th Annual Spring Conference.

As noted in an April 1, 2016 article in The Wall Street Journal (“MLP Investors’ Maze of Tax Trouble Keeps Getting Worse”), investors are learning the hard way that energy MLPs, set up to shield companies from Uncle Sam, could have unexpected tax consequences when times get tough.

It is yet another sign investors didn’t fully understand what they were getting into when they poured billions of dollars into master limited partnerships before the oil bust.

According to the article, “the implications are getting a test case in Linn Energy. When the Houston-based oil and gas producer announced plans to restructure its debt on March 22, it offered its 350,000 investors a deal many will likely jump to accept: swap their units in the MLP for an equal number of shares in LinnCo, the firm’s corporate parent. The swap will let those investors avoid a tax bill for their share of the forgiven debt, which counts as a gain. But there is a catch. Investors who exchange their Linn MLP units for shares could trigger another tax hit, because the swap counts as a sale.”

Investors in other energy-related MLPs could soon be facing similar choices.

“The energy partnerships are structured to avoid corporate income taxes by passing much of their tax burdens along with the bulk of their earnings through to investors. That arrangement worked well when oil and gas prices were rising. But with prices falling and some MLPs nearing a restructuring or bankruptcy, investors face the possibility of being left with units that have lost value and a tax bill as well, a double-hit that has surprised many investors.

The rub is the exchange of units for shares counts as a sale, and the sale of partnership units is far more complex than the sale of regular stock. For example, it can trigger a ‘recapture’ of benefits that investors have already received in their annual tax-deferred payouts for things like depletion and depreciation. Investors who exit a partnership also must take into account their units’ share of its liabilities.

At worst, an investor who opts for Linn’s offer could face both ordinary taxable income due to recapture and a capital loss, because of a steep decline in the value of the units, that can’t be used to offset it.

Investors holding Linn units in an IRA or Roth IRA could also face tax bills on the exchange of units for shares. To prevent abuses, the law imposes a special levy on certain partnership income if the total in all IRAs exceeds $1,000 a year. Even if investors holding MLPs in an IRA haven’t owed this levy on their annual payouts, a sale of units could come with a tax and capital losses within an IRA aren’t deductible.”

While the majority of IRA owners are unaware of these rules, IRA custodians are charged with enforcing them and some are reportedly watching more closely than they have in the past. Last year, Pershing reportedly filed tax forms for about 5,000 investors holding Kinder Morgan Energy Partners in IRAs after its 2014 restructuring and, most recently, Fidelity Investments has announced additional oversight of partnerships in IRAs for 2016.

If you are an individual or institutional investor who has any concerns about your investment in any energy related Master Limited Partnership investment, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

By early April, retirement investors will most likely be better protected. President Obama and his administration aim to complete a far-reaching rule holding retirement advisers to stricter standards. The proposed rules require brokers and financial advisers to act in the best interest of retirement savers, a higher standard than current regulations, which require only that advice be suitable. We will continue to update you on this developing ruling. Wall Street Journal writer Andrew Ackerman has more on the release of this news.

As disclosed by The Wall Street Journal on February 18, 2016 (“FBI Raids Headquarters of United Development Funding”), agents from the Federal Bureau of Investigation, armed with search warrants, raided the headquarters of this sponsor of real estate investment trusts and other investment vehicles and seized documents and other materials in what appears to be an expanding criminal investigation of UDF.

UDF, which has reportedly raised about $1 billion from retail investors for its non-traded real estate investment trusts, has been the subject of a number of criticisms and negative allegations in the past few months which have focused on the company’s concentrated lending practices (reportedly about 99% of the United Development Funding IV program’s loans have been made in Texas and, of that amount, approximately 67% of the loans have been advanced to a single borrower – Centurion American Development and its affiliates) and the contention that new money being raised has been used to repay earlier investors in its programs.

As to be expected with this latest development, shares of UDF’s largest fund, United Development Funding IV, crashed when news of the FBI’s raid hit the tape – falling 54% before trading was halted. Since December of 2015, the shares have now lost more than 80% of their value.

If you are an individual or institutional investor who has any concerns about your investment in any United Development Funding program, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

Released by the Office of Compliance Inspections and Examinations of the Securities and Exchange Commission, Examination Priorities for 2016.

CEO Lloyd Blankfien of Goldman Sachs plans on paying $5.06B to end federal and state investigations of its underwriting and sale of mortgage-backed securities from 2005 to 2007. The investment banking giant will pay $2.3B in civil penalties, $875M in cash payments, and $1.8B in consumer relief to settle all claims. The payout will lop off $1.5B from Goldman Sachs’ after-tax earnings, according to Law 360.