On December 7, 2018, the Financial Industry Regulatory Authority (“FINRA”) issued a comprehensive report (“Report on FINRA Examination Findings”) which “focuses on selected observations from recent examinations that FINRA considers worth highlighting because of their potential significance, frequency, and impact on investors and the markets.”

Among the issues discussed in this report were significant concerns about the suitability of investments that are being recommended to retail investors.

In fact, FINRA observed situations where “registered representatives did not adequately consider the customer’s financial situation and needs, investment experience, risk tolerance, time horizon,
investment objectives, liquidity needs and other investment profile factors when making
recommendations.”

In some cases, FINRA noted that “unsuitable recommendations involved complex products (such as leveraged and inverse exchange-traded products (ETPs), including exchange-traded funds (ETFs) and notes (ETNs)). In other cases, they involved overconcentration in illiquid securities, variable annuities, switches between share classes, and sophisticated or risky investment strategies.”

One of the products that was specifically discussed in this report was “volatility-linked” products that are being marketed to retail investors. As stated by FINRA, their examinations of firms indicated that, “despite prospectuses and other materials that included risk disclosures,
including explicit warnings about sales to retail customers, some firms nevertheless marketed volatility-linked products to retail customers who did not understand those products’ unique risks and made recommendations that were inconsistent with the investors’ investment profile, including risk tolerance and investment time horizon (e.g., in many of those instances, customers held the securities far longer than the holding periods – frequently one trading day – that were recommended in the product’s prospectus).”

If you are an individual or institutional investor who has any concerns about your volatility-linked investments with any brokerage firm, 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).

On December 3rd, 2018, the Indiana Securities Division of the Secretary of State’s office announced that LPL Financial agreed to pay a civil penalty of $450,000 for “various deficiencies” related to supervision of its Indiana operations.

Indiana said an investigation found that LPL supervisors did not properly review a number of emails involving Indiana operations for several years. The investigation also found that LPL did not conduct annual compliance exams of its Indiana branches as required by law.

Boston-based LPL offers securities through numerous independent broker dealers across the country, including many in Indiana. If an investor has any questions about his/her dealings with LPL, or any losses in your accounts, you should contact our office for a free evaluation. We represent many individual and institutional investors in securities arbitration claims with FINRA. We are happy to give investors a no-cost, no-obligation evaluation of your specific facts and circumstances.

On November 26, 2018, in an editorial in the New York Times (“When Blue Chip Companies Pile on Debt, it’s Time to Worry”), it was noted that “fueled by cheap credit, American corporations have been gorging on acquisitions” and that “the party may soon be over.”

In fact, in the low interest-rate environment that has persisted for the last decade, “debt issuance exploded” as “the amount of corporate bonds outstanding nearly doubled to $9 trillion, from $5.5 trillion.”

This editorial observed that “much of that surge has come in the form of bonds rated BBB, near the riskier end of the investment-grade spectrum – meaning that the money borrowed remains at some danger, albeit low, of not being paid back. There is now nearly $2.5 trillion of United States corporate debt rated in the BBB category, close to triple the amount of 2008, making up half of the investment-grade bond market. “

As interest rates rise and the economy appears to be slowing, the potential for debt default has become “a fear that has started to cause disturbing ripples in the debt and equity markets. “

One of the examples discussed in this article concerns General Electric (NYSE: GE) which has a reported $115 billion of outstanding debt, about $20 billion of which is due within a year. In October, “S&P lowered G.E.’s credit rating to BBB, and the cost of buying insurance against a default on G.E.’s bonds, so-called credit default swaps, has soared in November. That’s a sign of investors becoming nervous that G.E. might default.”

Another example is AT&T (NYSE: T) which has “about $183 billion of debt outstanding” and “is now one of the most indebted companies on the planet, thanks to its recent acquisitions of DirecTV and TimeWarner, which were paid substantially with debt. AT&T’s debt is also rated BBB, although only about $11 billion is coming due within a year.”

This editorial concludes that “there’s a lot at risk here. If these BBB-rated companies get downgraded further into ‘junk’ status — a distinct possibility if a slowing economy makes a dent in their profits or if their big acquisitions do not pay off — a vicious cycle is nearly inevitable. That means higher borrowing costs when it comes time to refinance or to obtain a new credit line and an increasing risk of default.”

If you are an individual or institutional investor who has any concerns about your fixed income investments with any brokerage firm, 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).

On November 27, 2018, in an article published on Bloomberg (“Wall Street’s FANG Notes for Mom and Pop Buckle on Tech Pain”), it was noted that main street investors who have purchased FANG or other technology related structured notes face a stark reality check.

“FANG” is the acronym for four technology stocks – Facebook (NASDAQ: FB), Amazon (NASDAQ: AMZN), Netflix (NASDAQ: NFLX) and Google (NASDAQ: GOOGL) which is now known as Alphabet.

With banks selling $2 billion of structured products linked to one or more of the now-struggling FANG members this year alone, investors are getting schooled on the risks lurking in complex debt securities — even those laden with supposed protective buffers. Investors have already missed out on coupon payments and, unless the U.S. equity markets significantly reverse course, investors face haircuts and more lost income.

Among the hardest hit of the technology-related securities are those structured securities that are tied to Nvidia Corp. (NASDAQ: NVDA), with $221 million linked to the chipmaker having been sold globally this year alone. The timing couldn’t be worse: the stock is down significantly since last month after having posted disappointing forecasts. Nvidia’s trading below the threshold required to receive the touted 11 percent coupon return per year.

Another example is Citigroup having sold $7.34 million of structured notes tied to Netflix in June when the shares were rocketing toward an all-time high. The six-month securities pay an annualized coupon of 13.75 percent as long as the streaming service remains above $308.32. With the stock trading significantly below the $308.32 price, investors would have received no coupon this month and risk losing a significant portion of their principal when the notes mature on Dec. 28 unless Netflix stages a rally to the tune of 10 percent by the maturity date.

If you are an individual or institutional investor who has any concerns about your technology investments with any brokerage firm, 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).

On November 20, 2018, an article in the New York Times (“The Tech Stock Fall Lost These 5 Companies $800 Billion in Market Value”) noted that “Wall Street’s turn against big tech is adding up” and that “as investors have dumped shares of Facebook, Amazon, Apple, Netflix, and Google-parent Alphabet, $822 billion in value has been wiped off their combined market value since the end of August.”

This article further noted that “based on the losses from each company’s high point in recent months, more than $1 trillion in value has been erased. Facebook, Apple and Amazon have endured the greatest declines, all down $250 billion or more from their respective peaks.”

In fact, “by the end of August, the market value of Apple and Amazon had each surpassed $1 trillion, and Alphabet was flirting with $900 billion. The combined market value of the five had reached $3.6 trillion.”

Clearly, “worries about global economic growth as well as lackluster earnings and outlooks the past two quarters have shaken investors’ confidence” in these stocks and “has investors questioning whether the values of these big tech companies have become too lofty.”

“Of course, Facebook, Amazon, Apple, Netflix, and Alphabet have faced steep sell-offs before, only to bounce back quickly. Just this year, the combined market value of those five companies has tumbled 7 percent or more during three separate periods. In each instance, the stocks resumed their march to fresh highs within weeks.”

Whether this time will be different – especially for those investors who have purchased these stocks on margin or have purchased other securities that are tied to the performance of these technology shares – is clearly the question of the day.

If you are an individual or institutional investor who has any concerns about your technology investments or margin account with any brokerage firm, 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).

In an Investor Alert that was issued on November 8, 2018 (“Know What Triggers a Margin Call”), the Financial Industry Regulatory Authority (“FINRA”) warned investors that “volatility is back, and market swings can sometimes bring an uncomfortable surprise to investors – a margin call.”

When an investor purchases stock on margin, the investor’s brokerage firm is lending the investor cash, using assets in the investor’s account as collateral, which is then used to purchase securities.

In order to trade on margin, an investor must have a margin account with his or her brokerage firm. As noted by FINRA, “there is a difference between a margin account and a cash account. In a cash account, all transactions must be made with available cash, while a margin account allows you to borrow against the value of the assets in your account to purchase securities.”

While using margin increases an investor’s purchasing power, FINRA notes that “there’s a flip side to buying with borrowed funds. Not only do you pay interest on the money you borrow, but buying on margin leaves you open to the potential for larger losses. In fact, you can even lose more money than you invested.”

If the securities an investor is using as collateral go down in price, the brokerage firm can issue a margin call. This is a demand that you repay all or part of the loan with cash, a deposit of securities from outside your account, or by selling securities in your account.

If an investor fails to make the required deposit, and the firm does not grant an extension to do so, the firm is required to liquidate the shares that were purchased on margin, or can liquidate other assets that were put up with the firm as collateral.

And FINRA notes an important reality check: a firm is not required to notify an investor of the sale, though most do so as a courtesy, nor does the firm let the investor choose which securities or assets are sold to meet a margin call.

With the recent volatility in many sectors of the market – especially in many technology and energy-related individual stocks – investors’ portfolios have been exposed to the potential danger that can be associated with a margin account. In fact, as of month-end September 2018, the amount of margin debit balances in customer accounts exceeded the monthly margin debit balances that were reported for each month in calendar year 2017.

Clearly a margin account and the attendant dangers associated with the same are not appropriate for every investor – especially for those who do not understand or want to assume the unlimited risks that are associated with them in an extremely volatile environment.

If you are an individual or institutional investor who has any concerns about your investments or margin account with any brokerage firm, 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).

In July 2018, one of our clients filed a FINRA arbitration against Jacksonville Beach-based financial advisor Kari Bracy and her brokerage firm, NYLife Securities, LLC regarding the sale of Future Income Payments, LLC (FIP, LLC). This sale occurred without full and fair disclosure being made to our investor about the risks associated with this investment and the amount of the commission earned.

Our firm is representing one (1) of Kari Bracy’s investors, and are urging her other FIP, LLC investors to contact us to discuss their experiences.

If Kari Bracy was your financial advisor and you invested in FIP, LLC you may have a potential claim. We are investigating claims by investors for unsuitable investing in FIP, LLC, and Kari Bracy not properly disclosing the very high risks associated with this investment.

If you are an individual or institutional investor who has any concerns about the losses experienced in FIP, LLC or any other securities, 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 a securities arbitration case with FINRA.

On Friday, September 14, 2018 the Securities and Exchange Commission charged an Indianapolis-based investment advisory firm and its sole owner (Tamara Steele and Steele Financial, Inc.) with selling approximately $13 million of high-risk securities to more than 120 advisory clients – many of whom are current or former teachers or other workers in public education – without disclosing that the firm and its owner stood to receive commissions of up to 18 percent from the sales.

Our firm is representing many of Tammie Steele’s and her brokerage firm’s investors, and are urging her BRS investors to contact us to describe their experiences.

The SEC’s complaint alleges that from December 2012 to October 2016, Steele Financial Inc. and Tamara Steele sold to advisory clients and other investors more than $15 million of the securities of Behavioral Recognition Systems Inc. (BRS), a private company previously charged with fraud by the SEC. All told, Steele and Steele Financial received commissions of cash and warrants from BRS that were worth more than $2.5 million. Steele and Steele Financial allegedly targeted their own advisory clients who generally did not invest in individual stocks, selling more than 120 clients approximately $13 million of BRS securities without disclosing that the defendants were receiving commissions from BRS. The complaint further alleges that the defendants created false invoices and took other steps to conceal their involvement selling BRS securities.
“We allege that Steele took advantage of her own advisory clients, including clients whom she herself described as ‘two-pension, two Social Security families,’” said Antonia Chion, Associate Director of the SEC’s Division of Enforcement. “Investment advisers must put their clients’ interests ahead of their own and make full and fair disclosure of financial conflicts of interest.”

The SEC’s complaint, filed in federal district court in Indiana, charges the defendants with violating the antifraud and broker-dealer registration provisions of the federal securities laws. The SEC is seeking disgorgement of ill-gotten gains with interest, penalties, and permanent injunctions.
If Tammie Steele was your financial advisor and had you invested in BRS Labs promissory notes or other BRS securities, you may have a potential claim. We are investigating claims by investors for unsuitable investing in BRS and Tammie Steele not properly disclosing the very high risks associated with this investment.

Here is an article relating to this post: https://www.ibj.com/articles/70514-sec-charges-local-investment-adviser-a-former-math-teacher-with-fraud

If you are an individual or institutional investor who has any concerns about the losses experienced in BRS Labs promissory notes or other BRS securities, 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 a securities arbitration case with FINRA.

The Wall Street Journal, on September 12, 2018 (“FANG Stock Play Can Fall Short”), noted that investors looking to reap the gains of highflying technology stocks while avoiding risk – through the purchase of “auto-callable” structured note products – are finding they can’t do both.

These structured notes “are often sold to mom-and-pop investors seeking higher-yielding alternatives to government debt, which is reliably safe. Offering documents say that buyers can earn fixed payouts of as much as 25% of the purchase price annually without taking on the risk of outright common-share ownership. Yet many of these FANG-linked notes fail to produce returns anywhere near that stated range, according to an analysis of securities filings by The Wall Street Journal. Many times, the upfront fees that banks collected were higher than the total returns earned by investors.”

“That is partly because the notes – dubbed ‘auto-callable’ because a rise in the stock price contractually triggers their redemption – are often redeemed in less than a year, and sometimes in as little as a month. In many cases, the auto-callable provision leads investors to earn scant returns and receive their money back long before the stated term of the investment.”

As noted in the article, auto-callable notes “are unlike common shares, which offer purchasers unlimited potential gains as well as the risk of total loss. They are also unlike U.S. Treasuries, which pay out periodic ‘coupons’ and entitle holders to full repayment at maturity. Instead, the notes offer gains up to a certain, specified threshold and protect against only certain, specified equity losses. Typically, if the linked stock or basket of stocks trades below a designated barrier – say, 75% of its initial value – when the notes mature, investors can lose a share of their principal on par with losses on the stock or basket.”

The Wall Street Journal specifically notes that Citigroup Inc., UBS Group AG and Royal Bank of Canada are among the banks this year that have issued more than $1 billion of auto-callable structured notes that are linked to one or more of the four FANG stocks: Facebook, Amazon, Netflix and Google parent Alphabet.

So how does the Wall Street house win with these investments? Consider just the following 2 examples that were cited in this article:

“When Citigroup sold $16.3 million of auto-callable notes tied to Amazon.com shares in mid-February, the firm advertised a 10% potential annual coupon for three years. Three months later, Amazon shares were up more than 20% – but the note was called, meaning that investors who purchased it received a total payout of 2.5%” while Citigroup “collected 3.5% in fees.”

Similarly, “in March, UBS issued a $150,000 note tied to Netflix. It paid 20.58% annually as long as shares of Netflix weren’t above the effective purchase price on monthly review dates. After one month, the stock was up 5.9%. The note was called, paying a coupon of 1.7% of the purchase price” while UBS reportedly “collected 2.7% in fees.”

If you are an individual or institutional investor who has any concerns about your auto-callable or structured product investments with any brokerage firm, 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).

Maddox Hargett & Caruso, P.C. is representing investors across the US who have lost money in FIP, LLC that was recommended by their stockbrokers, insurance agents and financial advisors.

Numerous state regulators have already taken action against FIP,LLC for the sale of improper loans, which violates many state consumer protection laws.

An investment in FIP, LLC was a very risky investment that was unsuitable for most investors. According to our clients, the significant risks of this investment were not disclosed to them by their advisor.

Our firm continues to investigate claims against various brokerage firms, insurance agents and financial advisors for the improper sale of FIP, LLC. If you are an individual or institutional investor who has any concerns about the investment of your hard-earned funds into FIP, LLC, 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 a securities arbitration case with FINRA or a lawsuit.