New York Securities Law Attorneys Blog

Problems Financial Advisors Face When They Don't Adhere to the Protocol

2012-02-22T22:05:56Z

On February 15, 2012, UBS Financial Services, Inc. ("UBS") sued David Kinnear and his partner Kathleen Bakas, two former UBS financial advisors in Chicago, alleging that they took confidential information, including customer information, to their new employer Wells Fargo Advisers LLC. UBS is requesting that the court issue an injunction against Mr. Kinnear and Ms. Bakas, preventing them from soliciting any customers they advised while at UBS, and preventing their disclosure of any proprietary information. UBS also filed an expedited arbitration hearing against Mr. Kinnear and Ms. Bakas with the Financial Industry Regulatory Authority Inc.

UBS alleges that these two financial advisors did not follow the Protocol for Broker Recruiting ("Protocol"). If this is found to be true, this situation could have been avoided. The Protocol, which was drafted in 2004, sets forth what information financial advisors are allowed to take with them when they are switching from one Protocol member firm to another Protocol member firm. Specifically, advisers are allowed to take client names, addresses, phone numbers, e-mail addresses, and account titles. Our firm provides legal advice to brokers in transition in order to help avoid the situation faced by Mr. Kinnear and Ms. Bakas.

For more on this issue see "Register Representatives in Transition Need to Hire Counsel."

Investor in Lyon Capital Management Wins $1.38 million FINRA Arbitration Award Against Merrill

2012-02-06T17:31:35Z

Lax & Neville LLP is investigating claims on behalf of investors regarding possible misconduct in connection with Merrill Lynch's sale of a collaterized loan obligation investment known as Lyon Capital Management VII.

Recently, a FINRA arbitration panel found Merrill Lynch, formerly Banc of America Securities, liable for investor losses and awarded $1.38 million in damages to the customer. The award represented all the money the investor lost in Lyon Capital Management VII, plus accrued interest, attorneys' costs and hearing fees.

If you have lost money investing in Lyon Capital Management, please call Lax & Neville, LLP, (212) 696-1999.

Westminster Securities Corp. v. Petrocom Energy Limited, Petrocom Limited and Howard Au - 11-607

2012-01-26T15:07:59Z

Lax & Neville successfully defends appeal of a significant American Arbitration Association ("AAA") award against Petrocom Limited and Petrocom Energy Limited ("Petrocom") (中港印能源集团有限公司("中港印"). Lax & Neville represented Westminster Securities Corporation ("Westminster") before the Second Circuit Court of Appeals, which has affirmed the ruling of Judge Cote in the Southern District Court of New York confirming the AAA arbitration award against Petrocom, a Chinese coal blending company. In the underlying arbitration, the Tribunal determined that Petrocom wrongfully failed to pay fees and issue warrants when Westminster successfully raised over $55 million for Petrocom and its Chairman and Chief Executive Officer, Mr. Howard Au (区可). Specifically, the Tribunal awarded Westminster approximately $2,250,000 in damages, which included placement agent compensation, attorneys' fees and costs and a $50,000 sanction against Petrocom for its "flouting" of the Tribunal's Order to have John P. O'Shea appointed to the Board of Directors of Petrocom, plus a total of 4,080,000 in Warrants. Based upon shareholder reports from Petrocom a reasonable valuation for these warrants is believed to be $2.00 per warrant (at a minimum), the total damages awarded to Westminster exceeded $10 million. The Second Circuit Panel held that the Tribunal's Award should be affirmed since the Tribunal provided a colorable justification when denying Petrocom's argument that the tail provision only applied when the placement agreement was terminated, and not when it expired. The Second Circuit Panel reasoned that the placement agreement's survival clause extended the tail provision in the event of termination or expiration, and therefore, Westminster was owed fees by Petrocom. The Second Circuit Panel also held that contrary to Petrocom's argument, Westminster's unjust enrichment clause was encompassed in the parties' agreement to arbitrate since the parties' arbitration agreement was worded broadly. Since Petrocom was enriched by Westminster's efforts to introduce several potential investors, the Second Circuit held that Westminster's unjust enrichment claim clearly related to the parties' placement agreements, and therefore the claim was governed by the arbitration clause.

Clients of the Merrill Lynch Phil Scott Team Win $1.2 million FINRA Arbitration Award Against Merrill, including, their Entire Net Out-of-pocket Losses, Interest, Costs and Attorneys' Fees

2012-01-18T00:50:04Z

This is the SECOND time in the past 6 months where Lax & Neville LLP has won a significant FINRA arbitration award against Merrill Lynch for purported sales practice abuses concerning the Merrill Lynch Phil Scott Team and the Merrill Lynch Phil Scott Team Income Portfolios. In the most recent arbitration, the Merrill Lynch Phil Scott Team recommended that 100% of Claimants' investible assets be invested in the Merrill Lynch Phil Scott Team Income Portfolios, which consisted of 100% equities. This concentration of equities was patently unsuitable for the Claimants for many reasons, not the least of which, was the fact the approximately 60% of the portfolio was pledged to three different Merrill Lynch loans. Claimants argued that the initial and continued recommendations by the Merrill Lynch Phil Scott Team to invest in the Income Portfolios were made without knowledge and understanding of the collateral requirements of the three Merrill Lynch loans. During the arbitration process, Claimants focused on the Merrill Lynch Phil Scott Team's blatant disregard of industry and regulatory obligations, and Claimants' risk tolerances and investment objectives. The FINRA arbitration award against Merrill Lynch consisted of $800,219 in compensatory damages which represented Claimants' entire net out-of-pocket losses and interest at the rate of 6% per annum from July 26, 2010 through the date the award is paid in full. In addition to the $800,219 award in compensatory damages, the Panel awarded Claimants all attorneys' fees requested in the amount of $391,474, along with their costs in the amount of $47,339.91. All hearing session fees were also assessed against Merrill Lynch.

Important Notice to Investment Advisory Clients of James Tagliaferri and TAG Virgin Islands

2011-12-15T20:47:27Z

We are currently representing investment advisory clients of James Tagliaferri and TAG Virgin Islands ("TAG"), who sued Tagliagerri, TAG, and other Defendants, in New York Supreme Court to recover their substantial investment losses incurred as a result of fraud, breach of fiduciary duty, breach of contract, unjust enrichment, and other causes of action. The Complaint alleges that TAG and Tagliaferri concocted a scheme to defraud our clients by transferring their funds to various TAG affiliated companies under the pretense of convertible note instruments, which for all intents and purposes were worthless. Our clients never received the return of the principal or interest payments from these notes when held to maturity. Moreover, TAG and Tagliaferri converted many of these notes into common stock in certain TAG affiliated companies that are also essentially worthless. Furthermore, TAG and Tagliaferri never disclosed to our clients the additional commissions they earned on these transactions. Upon information and belief, the TAG affiliated companies which TAG transferred our clients' money to included, but not necessarily limited to, the following entities: IEAH Corporation, IEAH Stables, Inc., IEAH, Crossing at Fleming, Fleming, JTS Corporation, 1920 Bel Air, LLC, Conversion Services International, Inc., Equities Media Acquisition Corp., Fund.com Inc., Gerova Financial Group Ltd., National Digital Medical Archive, Inc., Rineon Group, Inc., and Stanwich Absolute Return Ltd.

If you or anyone you know is an investment advisory client of Tagliaferri and TAG, and suffered investment losses as a result, please contact our firm at (212) 696-1999 in order to preserve your legal rights.

Register Representatives in Transition Need to Hire Counsel

2011-12-08T19:45:23Z

According to data tracked by InvestmentNews, a large number of registered representative teams have recently changed firms, and it is important for registered representatives to know that they should hire transition counsel to help them in their move. Our firm has acted as transition counsel for hundreds of registered representatives and is able to add value by negotiating a registered representative's contract with his/her new firm, negotiating any outstanding promissory note balances, discussing potential Protocol issues, representing registered representatives in FINRA arbitrations and Temporary Restraining Orders, and ensuring that the transition is as smooth as possible. If you are a registered representative who is considering transitioning to a new firm, it is in your best interests to contact us in order to better understand the important services we can provide to you.

URGENT: Adversary Proceeding Responses Due December 14, 2011

2011-12-08T19:23:51Z

The deadline to respond to complaints filed in Bernard L. Madoff Investment Securities, Inc. ("BLMIS") adversary proceedings is quickly approaching on December 14, 2011. We understand that counsel for the Trustee will not provide any additional extensions of the response due date unless the defendant named in the adversary proceedings filed a motion to withdraw the reference. Lax & Neville, LLP has filed motions to withdraw the reference in approximately 50 adversary proceedings on behalf of hundreds of BLMIS customers. If your response due date is approaching, and you would like to have your case removed to federal district court by filing a motion to withdraw the reference, please contact our office.

Important Notice to MF Global Account Holders

2011-11-04T20:16:58Z

On October 31, 2011, the Securities Investor Protection Corporation ("SIPC") filed a complaint against MF Global Inc., in the District Court for the Southern District of New York. See 11-cv-7750 (PAE). The SIPC complaint stated, "SIPC has determined that "MF Global Inc.," has failed or is [in] danger of failing to meet its obligations to its customers within the meaning of SIPC Section 78eee(a)(3)(A), and that there exists one or more of the conditions specified in SIPA Section 78eee(b)(1). Specifically, MF Global Inc. is unable to meet its obligations as they mature." See 11-cv-7750 (PAE) pg. 2. The Honorable Paul Engelmayer immediately appointed James W. Giddens as the SIPC Trustee tasked with affording MF Global Inc. customers the protection afforded by the Securities Investor Protection Act of 1970. Also on October 31, 2011, MF Global Holdings Ltd. and MF Global Finance USA Inc. (collectively "MF Global") filed voluntary petitions for relief under Chapter 11 of the United States Bankruptcy Code (the "Chapter 11 Bankruptcy") in the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"). The Bankruptcy matters have been assigned to the Honorable Martin Glenn. Many customer and account holders of MF Global have questions. Lax & Neville has substantial experience in SIPC liquidations. If you hold an account at MF Global, please contact Lax & Neville, LLP to discuss the ramifications of the Bankruptcy matter and the potential filing of SIPC Claims on your behalf.

A FINRA Arbitration Panel Found in Favor of a Customer of Deutsche Bank who Invested in the Aravali Fund

2011-08-18T19:01:49Z

A large FINRA arbitration award was recently rendered against Deutsche Bank Securities, LLC ("Deutsche Bank") for sales practice abuses concerning Deutsche Bank's selling and marketing of the Aravali Fund, LP ("Aravali Fund"). The Aravali Fund was sold to investors who were seeking income and safety of principal as an alternative to a municipal bond portfolio. In reality, the Aravali Fund was a very risky interest arbitrage scheme comprised of a significant short position in treasury bonds, interest rate swaps and a highly levered pool of relatively illiquid municipal bonds. Not long after inception, the Aravali Fund plummeted in excess of 90% in value, and was liquidated. Based on these claims, our firm has filed numerous arbitrations against Deutsche Bank on behalf customers of Deutsche Bank who invested in the Aravali Fund.

The FINRA arbitration panel found Deutsche Bank liable for the investor's losses in the Aravali Fund in the amount $803,850. Deutsche Bank was also ordered to pay the entire cost of the hearing. The FINRA award appears to represents about half of the client's investment loss in the Aravali Fund. It also appears that this investor, like all other investors in the Aravali Fund, received, acknowledged and signed the Aravali Fund offering materials, including, the Subscription Agreement and Private Placement Memorandum, which purportedly contained risk disclosures, and was used in defense of the claims; yet the Panel appears to have awarded half the investor's damages for his investment in the Aravali Fund.

If you suffered losses stemming from the Aravali Fund, contact Lax & Neville, LLP.

UBS loses Motion to Dismiss in Lehman Brothers Securities and ERISA Litigation

2011-08-05T18:59:35Z

On July 27, 2011, Judge Lewis A. Kaplan of the Southern District Court of New York denied UBS Financial Service Inc.'s Motion to Dismiss a class action complaint filed by investors of Lehman Brothers "Principal Protection Notes" ("Lehman Note"). See In re: Lehman Brothers Securities and ERISA Litigation, Index No. 09-MD-2017 (LAK), document no. 263. UBS attempted to dismiss the class action complaint by asserting that despite UBS broker's representations to Lehman Note investors that the Lehman Notes were a safe and conservative investment, with no risk of loss of principal, those investors were warned of the inherent risks of the Lehman Notes through written disclosures contained in pricing supplements and offering materials. The Court rejected this argument since statements in the Lehman Note offering materials regarding the risks associated with investing in the Lehman Notes were offset by more prominently and frequently cited statements regarding principal protection. Specifically the Court held, "the Court can not conclude as a matter of law that the repeated and emphasized statements about principal protection were offset sufficiently, as a matter of by, by the inconspicuous and scattered warnings . . . about Lehman's solvency." See In re: Lehman Brothers Securities and ERISA Litigation, Index No. 09-MD-2017 (LAK), document no. 263, p.98.

USDJ Denise L. Cote confirmed a $10 million AAA Arbitration Award in the matter of Westminster Securities Corporation v. Petrocom Energy Limited and Petrocom Limited

2011-07-07T19:14:44Z

Judge Cote has confirmed an American Arbitration Association Award against Petrocom Limited and Petrocom Energy Limited ("Petrocom"), a Chinese coal blending company that was recently highlighted in a New York Times article. The esteemed Tribunal of top international arbitrators determined that Petrocom failed to pay placement agent fees and issue warrants when Westminster Securities Corporation ("Westminster") raised over $35 million for Petrocom and its Chairman and Chief Executive Officer, Mr. Howard Au. Specifically, the Tribunal awarded Westminster approximately $2,250,000 in damages, which included placement agent compensation, attorneys' fees and costs and a $50,000 sanction against Petrocom for its "flouting" of the Tribunal's Order, plus a total of 4,080,000 in Warrants. Considering that these warrants are believed to be valued at $2.00 per warrant (at a minimum), the total damages awarded to Westminster exceeded $10 million.

Clients of the Merrill Lynch Phil Scott Team Win $880,000 FINRA Arbitration Award Against Merrill

2011-06-24T21:11:36Z

Lax & Neville, LLP recently won an $880,000 FINRA arbitration award against Merrill Lynch for purported sales practice abuses concerning the Merrill Lynch Phil Scott Team and the Merrill Lynch Phil Scott Team Income Portfolio. The Merrill Lynch Phil Scott Team recommended that 100% of Claimants' assets be invested in the Merrill Lynch Phil Scott Team Income Portfolio, which consisted of 100% equities. In doing so, the claimants asserted that the Merrill Lynch Phil Scott Team ignored the Claimants' individual risk tolerances and investment objectives. Specifically, the claimants argued that the most egregious fact was that the Merrill Lynch Phil Scott Team recommended that a 90 year old widow in very poor health invest all of her assets in the 100% equities Merrill Lynch Phil Scott Team Income Portfolio. During the arbitration process, Lax & Neville, LLP focused on the Merrill Lynch Phil Scott Team's disregard of industry and regulatory obligations. In addition to the $880,000 award in compensatory damages, the Panel also granted Claimants' Motion for Sanctions and "assessed fees for hearings on discovery to Respondent as sanctions against Respondent for untimely compliance with the Panel's orders to compel the production of documents."

Lax & Neville Investigates David Lerner and Apple REIT's

2011-06-15T23:17:06Z

Lax & Neville, LLP a leading securities arbitration law firm has been contacted by investors in Apple REIT and we are currently investigating the sales of the Apple REIT's by David Lerner and other firms to the public. On March 31, 2011, the Financial Industry Regulatory Authority ("FINRA") charged David Lerner & Associates ("David Lerner"), a Long Island based broker-dealer, based upon its misrepresentations regarding the Apple REIT Ten, an unlisted $2 billion Real Estate Investment Trust. FINRA alleged that David Lerner unsuitably invested unsophisticated and elderly investors in the illiquid Apple REIT Ten. David Lerner significantly profited from, at the expense of thousands of innocent investors, when underwriting and selling approximately $7 billion of Apple REIT securities.

If you are a victim who invested in the Apple REIT Ten, and would like to retain Lax & Neville, LLP, please call Lax & Neville, LLP at (212) 696 - 1999.

FINRA Fines UBS for Sale of PPNs

2011-04-11T21:40:21Z

There has been a significant development for UBS customers who purchased principal protected structured notes issued by Lehman Brothers Holdings, Inc ("Lehman Brothers"). The Financial Industry Regulatory Authority ("FINRA") fined UBS $2.5 million and also ordered it to pay $8.25 million in restitution to innocent investors as a result of UBS's misconduct. These principal protected structured notes were developed, underwritten, offered, marketed and sold by UBS to its customers as safe and principal protected investments; however, they were extremely risky and became worthless when Lehman Brothers filed for bankruptcy.

Prior to this FINRA sanction, our firm had filed numerous arbitrations against UBS on behalf of customers of UBS who invested in Lehman Brothers principal protected structured notes. Now it seems that our allegations have proven true.

A number of arbitration awards have already been issued in favor of customers who have suffered losses in these product. Our review of FINRA's arbitration awards indicates that all available arbitration awards concerning the Lehman Brothers principal protected structured notes have been rendered in favor of investors and against UBS. Please contact us today if you have invested in any structured notes issued by Lehman.

The detailed settlement issued by FINRA can be found here: http://www.finra.org/web/groups/industry/@ip/@enf/@ad/documents/industry/p123478

Don't Limit Your Recovery If You Are a Owner Of Lehman Principal Protected Notes

2011-03-11T20:51:24Z

On January 25, 2011, Lehman Brothers Holdings Inc. ("Lehman") and its affiliates (collectively the "Debtors") filed an Amended Plan and Disclosure Statement which included, among other things, the Debtors' estimate of the percentage of recovery for Lehman's senior note holders. According to the Disclosure Statement, investors with "Senior Unsecured Claims" in the Lehman bankruptcy are expected to recover 21.4% of the allowed amount of their claims. The estimated recovery percentage will be reduced to 17% if the requisite percentage of investors does not vote to accept the Amended Plan.

What does this mean for investors of principal protected notes issued by Lehman and sold by other brokerage firms, such as UBS Financial Services, Inc. ("UBS")? UBS was a major seller, distributor, underwriter and marketer of hundreds of millions dollars of Lehman Principal Protected Notes. You are still able to file an arbitration claim against the brokerage firm, such as UBS, which sold you the principal protected notes based on misrepresentations made to you in connection with the sale of those notes. Our firm represents numerous investors in arbitrations against brokerage firms, such as UBS, which sold these notes and you should not limit your recovery to the amount you will ultimately receive in the Lehman bankruptcy. Please contact us today if you have invested in any structured notes issued by Lehman.

For more on this issue see "Several FINRA Arbitration Panels Find in Favor of Investors in Lehman Brothers Principal Protected Structured Notes."