New York Securities Law Attorneys Blog

CFP Board Proposed Sanction Guidelines

2012-05-15T16:31:56Z

Recently, the CFP Board filed proposals for heightened sanction guidelines to be imposed on certified financial planners ("CFPs") who violate the CFP Board Rules. Lax & Neville LLP has experience representing individuals in CFP Board investigations, hearings and enforcement matters. A recent matter in which we were retained resulted in a complete dismissal of the CFP Board's charges after a hearing. If you are a CFP and have received a complaint from the CFP Board or have been charged with violating CFP Board Rules, please contact our office immediately.

Lax & Neville and Deutsch & Lipner Win $154,479 FINRA Arbitration Award In Lehman Brothers Structured Note Case Against UBS Financial Services, Inc.

2012-04-27T14:46:31Z

On April 25, 2012, Lax & Neville LLP and Deutsch & Lipner, both leading securities arbitration law firms, won a FINRA arbitration award against UBS Financial Services, Inc. for improper sales practices and fraud in connection with UBS's marketing and sale of a Structured Product - the Lehman Return Optimization Security tied to the S&P 500. UBS is reported to have sold as much as $1 billion of Lehman's Structured Notes to its customers. It also sold other Structured Products which were mis-marketed and sold to UBS customers in inappropriate ways.

In the case won by our team, FINRA Case No. 10-02584, the Panel awarded the Claimant damages of $154,479, plus interest from October 1, 2008 until the Award is paid in full. The award places our client in the exact same position she would have been in had Lehman not filed for bankruptcy. The Award grants her damages equal to the value the security would have had on the maturity date if Lehman had not filed bankruptcy, less the current value of the security.

This equitable result is another win for our many clients who were deceived when the product was sold to them. The Statement of Claim in the case alleged that UBS did not inform the Claimant that these supposedly principal-protected securities were in fact the unsecured debt of the then-troubled Lehman Holdings, and that UBS did not inform its clients about what it (UBS) knew about Lehman's troubles. UBS tried to defend the case by alleging it had made full disclosure, and that the sales had been made in December 2007 -- which UBS alleged was before Lehman's troubles were known. As it had in every other prior case in which our legal team was involved, the arbitrators rejected UBS's defenses.

To view this Award, click here.

Lax & Neville Investigates Nontraded REITs

2012-04-02T21:38:17Z

Lax & Neville LLP, a leading securities arbitration law firm, is currently investigating possible sales practice violations in the sales of nontraded REITs by various firms to the public. Many investors have complained that they were told that nontraded REITs were stable, long-term investments. While some investors were told about the lack of a market for resale, others were not, or were never informed of the importance of liquidity. Some investors were told that these REITS invested in commercial real estate and that this asset class historically had performed well, without a full discussion of commercial real estate's ups and downs. Since most nontraded REITs are only given a value once a year, it is difficult for investors to understand their value. Many investors have watched their REIT investments significantly plunge in value and still do not understand what they can do about it.

Some of the larger nontraded REITs with large losses are as follows:

Decline per share

(from offering through most recent SEC filing)

Behringer Harvard Opportunity REIT I -58.80%

Behringer Harvard REIT I -53.60%

Behringer Harvard Short-Term Opportunity Fund -96%

Cornerstone Core Properties REIT -71.88%

Inland Western Retail Real Estate Trust Inc. -30.50%

KBS Real Estate Investment Trust Inc. -48.40%

If you are an investor/ victim who invested in nontraded REITs, and would like to learn more about your options for possible recovery, please contact our firm at (212) 696 - 1999.

"MAT FIVE INVESTMENT LOSSES -TIME MAY BE RUNNING OUT"

2012-03-29T13:57:41Z

Lax & Neville LLP has been retained by several investors who lost money in MAT Five LLC ("MAT Five"), claiming it was inappropriately sold by Citigroup Inc. ("Citigroup") in 2006 and 2007. MAT Five had a $500,000 minimum investment requirement and was promoted to fixed-income investors who were seeking preservation of capital. Citigroup represented that the MAT Five was designed to produce stable cash flows in a tax-advantaged arbitrage opportunity. In actuality, the MAT Five was a very risky investment. Based on these claims, Lax & Neville has filed numerous arbitrations against Citigroup on behalf of investors and customers of Citigroup who invested in the MAT Five; and has been successful in obtaining significant settlements for its clients who invested in the MAT Five. Numerous arbitrations awards have been rendered against Citigroup for sales practice abuses concerning the selling and marketing of MAT Five. In various instances, investors have been awarded their full investment loss in the MAT Five. Investors only have (6) six years from when they purchased the MAT Five to file a claim. Once the (6) six years have elapsed, an investor's claim is no longer eligible for submission to FINRA arbitration. If you have lost money investing in the MAT Five, please call Lax & Neville LLP, (212) 696-1999.

Former Morgan Keegan broker, Michael Venable, is Barred from the Securities Industry

2012-03-23T18:16:10Z

FINRA has permanently barred former Morgan Keegan broker, Michael Venable, from the securities industry for investing his clients' funds in highly leveraged Exchange Traded Funds, also referred to, as ETFs. According to FINRA, Michael Venable made the unsuitable investments for middle-class, unsophisticated and conservative clients with conservative investment objectives and risk profiles. Specifically, Michael Venable invested his clients' funds in leveraged Direxion ETFs on margin. FINRA also ruled that Michael Venable engaged in excessive trading which generated high commissions for Venable.

If you invested with Michael Venable and/or have lost money investing in Direxion ETFs, please call Lax & Neville LLP at (212) 696-1999.

URGENT: The Deadline to File Motion to Withdraw the Reference to Judge Rakoff in Madoff Clawback Adversary Proceedings Is April 2, 2012

2012-03-22T19:54:38Z

The deadline to file a motion to withdraw the reference of an adversary proceedings filed in the Bernard L. Madoff Investment Securities, Inc. ("BLMIS") bankruptcy matter is quickly approaching on April 2, 2012. Judge Jed. S. Rakoff, District Court Judge for the Southern District of New York, ordered that no motions to withdraw the reference will be considered if the motions are not filed on or before April 2, 2012. Lax & Neville, LLP has filed motions to withdraw the reference in approximately 50 adversary proceedings on behalf of hundreds of BLMIS customers. If you would like to have your case removed to federal district court by filing a motion to withdraw the reference, please contact our office immediately.

"ARAVALI FUND LOSSES -TIME MAY BE RUNNING OUT"

2012-03-19T20:34:14Z

Lax & Neville LLP has been retained by several investors who lost money in the Aravali Fund claiming it was inappropriately sold by Deutsche Bank Securities and other brokerage firms in 2006 and 2007. The Aravali Fund was sold to investors who were seeking income and safety of principal as an alternative to a portfolio of municipal bonds. In reality, the Aravali Fund was a very risky interest rate arbitrage hedge fund, and not long after inception, the fund plummeted in excess of 90% in value and was liquidated. A large FINRA arbitration award was rendered against Deutsche Bank for sales practice abuses concerning the selling and marketing of the Aravali Fund. The FINRA arbitration panel found Deutsche Bank liable for the investor's losses in the amount $803,850, which appears to represent about half of the client's investment loss in the Aravali Fund. Lax & Neville has been successful in obtaining significant settlements for its clients who invested in the Aravali Fund. Investors only have (6) six years from when they purchased the Aravali Fund to file a claim. Once the (6) six years have elapsed, an investor's claim is no longer eligible for submission to FINRA arbitration. If you have lost money investing in the Aravali Fund or have information about Deutsche Bank's marketing of the Aravali Fund, please call Lax & Neville LLP, (212) 696-1999.

Court Denies Merrill Lynch's Motion to Vacate an $880,000 FINRA Arbitration Award Against Merrill Concerning the Merrill Lynch Phil Scott Team

2012-03-13T20:27:22Z

In a Decision, dated March 9, 2012, Justice J. Lobis of the Supreme Court of the State of New York denied Merrill Lynch's Motion to Vacate 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. In its Decision, the Court stated, "there is no basis for the court to vacate the Award...Respondent has not made a showing that it was subject to a fundamental unfairness such that it was deprived of a fair hearing." Accordingly, the Court confirmed the FINRA Arbitration Award against Merrill Lynch. During the arbitration process, Lax & Neville LLP focused on the Merrill Lynch Phil Scott Team's disregard of industry and regulatory obligations. The Claimants asserted that the Merrill Lynch Phil Scott Team ignored the Claimants' individual risk tolerances and investment objectives when it recommended that 100% of Claimants' assets be invested in the Merrill Lynch Phil Scott Team Income Portfolio, which consisted of 100% equities. The FINRA Arbitration Award against Merrill Lynch was rendered on June 23, 2011.

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.