FINRA Fines for ETFs

FINRA levies fines for brokerage ETF investments, an investment fraud attorney at Meyer Wilson explains what this implies for people who have lost money in ETFs

Insurance Agents Warned As Jail Time Results from Annuity Case Over Indexed Annuities Sold to Elderly

Insurance agent’s annuity case involving indexed annuities serves as warning to other agents. Investment fraud attorney David Meyer explores insurance fraud.

FINRA Says Private Placements and Non-Traded Real Estate Investment Trusts Are Top Focus

James Shorris, FINRA’s executive vice president and executive director of enforcement, recently announced that monitoring Regulation D private placements and non-traded real estate investment trusts is a “major, major initiative” for FINRA’s enforcement department (“Private deals at top of Finra's hit list,” InvestmentNews, Feb. 2, 2011). The investments are currently the top two areas of focus for the department. According to the article, FINRA is primarily concerned with the lack of due diligence some broker-dealers have shown when recommending private placement products, such as those offered by Medical Capital Holdings Inc. and Provident Royalties LLC, as suitable for their clients. Both Provident Royalties LLC and Medical Capital Holdings, Inc. were sued by the SEC in 2009. Provident Royalties was charged with the operation of a $485 million offering fraud and Ponzi scheme, and Medical Capital was charged with the operation of a $77 million offering fraud. Since mid-2009, lawsuits and concerns over lack of due diligence have caused at least a dozen independent broker-dealers to file for bankruptcy or to run into major problems with FINRA. The organization’s enforcement department is now committed to closely monitoring the remaining firms that sell such products. Non-traded real estate investment trusts typically require that investors hold the securities for a fixed period of time, in some cases up to 10 years or longer. FINRA’s concern is that many sales representatives may not have explained the illiquidity of the investments to potential investors prior to purchase. FINRA’s enforcement department will be investigating whether the products were sold properly to customers. About our law firm: The law firm of David P. Meyer & Associates represents individuals across the country who have been harmed by investment fraud. All our cases are handled on a contingency fee and we never request a retainer of any kind. Contact us toll-free at 1.866.429.2360 for more information or complete the online form on the top of this page and we will respond promptly.

SEC Proposes to Improve Regulation and Disclosure of Mutual Funds' "Ongoing Sales Charges"

In 2009, investors paid $9.5 billion in 12b-1 fees, according to a July 21 WSJ article. In 2007, the fees brought in over $13 billion.

As discussed here, the SEC has repeatedly voiced concerns about investors' understanding of these fees. In a July 21 Press Release detailing an SEC proposal to limit funds' 12b-1 fees by improving regulation and disclosures to investors, SEC Chairman Mary L. Schapiro focuses again on the problem:

"Despite paying billions of dollars, many investors do not understand what 12b-1 fees are, and it's likely that some don't even know that these fees are being deducted from their funds or who they are ultimately compensating. Our proposals would replace rule 12b-1 with new rules designed to enhance clarity, fairness and competition when investors buy mutual funds."

12b-1 fees are distribution and/or service fees that are considered an annual marketing expense of a mutual fund. The fees, normally 0.25-1% of a fund's net assets, are used (in part) to compensate brokers and others who sell fund shares.

According to the SEC, the proposed rules would protect investors in four ways, including: by limiting fund sales charges, by improving transparency of fees, by encouraging retail price competition, and by revising fund director oversight duties.

The SEC's proposal provides for a transition period for the new rules and a 90-day public comment period, according to the press release.

About our law firm:

The law firm of David P. Meyer & Associates represents clients who have been harmed by investment fraud. Contact us toll-free at 1.866.827.6537 for more information.

 

Goldman Sachs & Other Banks Could Face a New Era of Litigation

Goldman Sachs and other banks could be facing a new era of litigation, following an SEC complaint filed against Goldman. The charges have to do with a complex investment tied to the performance of pools of risky mortgages that was marketed by Goldman.