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Today’s Wall Street Journal profiles a $1.2 million FINRA arbitration claim filed by Stoltmann Law Offices against Merrill Lynch.  The article details the abuses engaged in by the firm in selling the Strategic Return Notes to retail investors and our efforts to recover these losses through claims for fraud, unsuitable investment recommendations and lying about the risks associated with these investments (the entire article can be viewed at the following link http://www.wsj.com/articles/sec-readies-case-against-merrill-over-notes-that-lost-95-1466544740).  The case centers around secretly recorded phone conversations, secured by Stoltmann Law Offices, of 13 conversations between the Merrill Lynch financial advisors and senior Merrill Lynch executives, including Brian Partridge, head of U.S. product sales for Merrill’s wealth-management division at the time.  As alleged in our FIRNA Statement of Claim, the Merrill Lynch advisers were told on the calls not to suggest to their clients the product was flawed. “What you’d love to do is avoid customer complaint,” Mark Ryan, a manager at the firm, told the brokers. “We can’t just tell everyone, ‘Hey this is a defective product.’”

Due to the allegations we made in the Statement of Claim and in working with two major regulators, we were able to get Merrill Lynch fined for these sales practices in the amount of $15 million.  Both the Securities and Exchange and FINRA Enforcement fined Merrill Lynch for these abusive practices associated with the structured products (please see here for the SEC Enforcement action https://www.sec.gov/news/pressrelease/2016-129.html and here for the FIRNA Enforcement action https://www.finra.org/newsroom/2016/finra-fines-merrill-lynch-5-million-related-return-notes-sales).

If you’d like to learn how to sue Merrill Lynch for abusive structured product sales, please call our investment fraud firm in Chicago, Illinois.

London-based research firm Fideres Partners LLP suggests that the process of pricing and selling new corporate bonds may be inaccurate. Corporate bonds’ price in the days after their issuance may hint to a systemic underpricing by major dealers, according to the Fideres report, published last week. The firm estimates that the underpricing of new debt may have cost U.S. companies as much as $18 billion in extra interest in bonds issued between 2010 and 2015 by pulling up their borrowing costs at a time when benchmark interest rates were at low levels. Companies have been racing to sell new bonds to take advantage of low interest rates. The banks who sell these bonds may underprice new bonds in order to make sure they end up in the portfolios of large buy and hold investors who are seen as more reliable. The concessions on new issues may also arise as investors and bankers need to be compensated for the extra risk of holding corporate credit as opposed to safer securities, such as government debt.

Stoltmann Law Offices is investigating United Mortgage Trust which sells non-traded real estate investment trusts (REITs). REITs are securities that invest in real estate through property or mortgages and often trade on major exchanges like a stock. They typically offer higher dividends than other products and that is why they tend to be risky investments. A broker must take into account the investor’s age, net worth, investment objectives, and risk objective before recommending a security. If he or she does not, his or her brokerage firm could be held responsible for investment losses. Lack of liquidity is often a concern for investors and REITs are subject to recent developments in the Residential Sub-prime Mortgage Market, a higher risk of default than conventional mortgage loans, market and business conditions and bankruptcy of borrowers, among other factors. If you lost money in United Mortgage Trust, please call our securities law firm to discuss your options with one of our attorneys. The call is free with no obligation. We sue firms such as United Mortgage Trust to recover losses for investors.

Stoltmann Law Offices is investigating Jeffrey Ostrander, a registered representative with Amerirprise Financial Services in Overland Park, Kansas. According to Ostrander’s Financial Industry Regulatory Authority (FINRA) BrokerCheck report, a customer alleged that he misrepresented and recommended unsuitable investments in real estate investment trusts (REITs) and a General Motors bond. A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges like a stock. A REIT typically provides an investor with an extremely liquid stake in real estate and typically offer high dividend yields. REITs are not suitable for every investor. They can be extremely risky and a broker must take into account a client’s age, net worth, investment strategy and investment sophistication among other factors before recommending that particular security. If he does not, his firm or former firm can be held responsible for investor’s money losses because the firm is ultimately responsible for reasonably supervising the broker. Please call us if you suffered losses with Jeffrey Ostrander and REIT or any other type of security sales.

Jeffrey Ostrander was registered with The Stuart-James Company in Denver, Colorado from March 1990 until September 1990, Dean Witter Reynolds in Purchase, New York from September 1990 until September 1991, Painewebber Inc. in Weehawken, New Jersey from May 1992 until January 1994, Boatmen’s Investment Services in St. Louis, Missouri from January 1994 until June 1995, Piper Jaffray in Minneapolis, Minnesota from June 1995 until March 1996, Invest Financial Corp in Tampa, Florida from July 1996 until October 1999, and SII Investments Inc. in Appleton, Wisconsin from October 1999 until May 2005. He is currently registered with Ameriprise Financial Services in Overland Park, Kansas and has been since October 2009. He has three customer disputes against him.

The Financial Industry Regulatory Authority (FINRA) fined StockCross Financial Services $800,000. StockCross Financial is owned by David Gebbia, the husband of the former “Real Housewives of Beverly Hills” star Carlton Gebbia. It is alleged that StockCross engaged in naked short selling, which is the practice of short selling shares that have not been affirmatively determined to exist. Due to various loophoes in the rules and discrepancies between paper and electronic trading systems, naked short selling is possible. Many short sales fail to deliver from the seller to the buyer within the mandatory three-day stock settlement period as evidence of naked shorting. Naked shorts may represent a major portion of these failed trades. FINRA claims StockCross violated regulations requiring that they deliver shares of a security they had sold short, and had inadequate supervisory systems that went back three years or more.

The Securities and Exchange Commission (SEC) have rules in place to stop “abusive” short selling. FINRA also found that from November 2009 until May 2013, the firm’s system to monitor and track the sales of securities it sold short was “fundamentally flawed.” FINRA claims that because of this failed system, StockCross failed to deliver the shares for seven or more consecutive settlement days in 2,000 instances. The firm also executed over 4,000 short sales without delivering or borrowing the security.

Stoltmann Law Offices is investigating Fera Shivaee, a registered representative with Centaurus Financial. Shivaee allegedly made unsuitable investments, misrepresentations and false statements in connection with recommendations to invest in private placements such as tenants-in-common (TICs). In the past nine years, TICs have been a major contributor to bankrupting brokerage firms. Almost half of the companies that sold TICs are no longer in business. TICs are private placements that have no secondary trading market and are therefore illiquid investments. Usually the TICs are sold by an investment advisor who charges an up-front fee. The investor runs the risk of holding the property for a significant amount of time and the subsequent sale of the property may occur at a discount to the value of the real property interest. The costs associated with TICs may also outweigh potential tax benefits to the investor.

Ms. Shivaee was registered with Marnier Financial Services in Largo, Florida from March 1993 until November 1993, Centaurus Financial in Anaheim, California from October 1993 until November 1996, Finance 500 in Irvine, California from November 1995 until December 1996 and SunAmerica Securities in Phoenix, Arizona from October 1996 until November 1997. She is currently registered with Centaurus Financial in Irvine, California and has been since November 1997. Ms. Shivaee has two customer disputes against her, one of which is currently pending.

If you lost money with Ms. Shivaee, please call our securities law firm based in Chicago, Illinois at 312-332-4200 to speak to an attorney. You may be able to sue Centaurus Financial for investment losses. They had a duty to reasonably supervise her while she was employed with them. The call is free with no obligation.

Royal Alliance Associates was ordered to pay $1.4 million to three retirees over allegations that it was negligent in supervising sales of nontraded real estate investments trusts (REITs) and variable annuities. REITs are securities that sell like a stock on the major exchanges and invests in real estate directly, either through properties or mortgages. They are not suitable for all investors, as they can be risky investments. In Royal Alliance’s case, the retirees who were sold the REITs were former employees of AT&T Inc. and were encouraged by a former broker, Kathleen Tarr, to take a lump-sum buyout from their employer rather than a lifetime annuity. That money was then placed in REITs and variable annuities. These securities were high-cost, illiquid products, which turned out not to be suitable for the low-income and low-wealth AT&T retirees. According to the lawsuit: “Supervisors at Royal Alliance were not supervising these particular brokers. Part of the punitive award they received is due to the complete failure of Royal Alliance to supervise its registered reps.” Royal Alliance had a duty to supervise its brokers to attempt to prevent them for recommending unsuitable investments. If you invested with Royal Alliance Associates, you may be able to sue them for investment losses. Please call our Chicago-based securities law firm at 312-332-4200 to speak to an attorney. The call is free.

Garden State Securities has entered into a Letter of Acceptance, Wavier and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA) and was censured and fined $15,000 for failing to execute orders fully and in a timely manner. Specifically, the firm did not do its due diligence on how favorably trades would perform before suggesting the best transactions with firm customers. Garden State also did not show the correct entry time on brokerage order memorandum. This is against FINRA rules. The fine was imposed in November 2013.

Also, in January 2013, Garden State was fined $5,000 for transmitting execution or combined order/execution reports to the Order Audit Trail System (OATS). Therefore, the OATS reporting system was unable to accurately relay information based off of the data it was given. Garden State also did not report their findings in a timely basis.

In 2012, Garden State was fine $265,000 and also entered into an Offer of Settlement with FINRA, saying that each of Garden State’s associated personnel must complete 16 hours of AML training, and the firm must review its supervisory system.

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