Securities Attorney

Advanced Equities and First Allied Sales of Fisker Automotive Private Placements Under Scrutiny – Part II

October 23, 2013 | by Staff Attorney

This article continues my in depth look into how unsuspecting investors are sold speculative private placements.

While investors were told that Fisker Auto’s prospects were fantastic, nothing could have been further from the truth. In February 2012, the DOE loan had been frozen after $192 million had been given to the company because it hadn’t hit certain milestones with its Karma car product. The last payment Fisker had received from the DOE was in May 2011. Yet, according to investors, Advanced Equities and First Allied continued to sell Fisker Auto shares without disclosing that the DOE was no longer backing the venture, presumptively because the auto makers chances of success had grown increasingly slim.

From December 2011 into 2012, Advanced Equities increasing began to run into fundraising problems. As Fisker Auto fell into a increasing number of technical, delivery, and political problems with its cars the car maker’s ability to attract new capital plummeted. Yet, the company still needed money. So the brokerage firms turned to threatening investors by telling them that unless they agreed to invest more money into Fisker Auto their current shares will be diluted and their preferred stock will be converted to common stock.

Gana LLP Investiga las ventas de Bonos del Fondo de Puerto Rico hechas por UBS Puerto Rico, Popular Securities, y a Santander Securities

October 22, 2013 | by Staff Attorney

La caída en los precios de los bonos de Puerto Rico ha causado pérdidas financieras sustanciales a los inversionistas en activos que les fueron vendidos como como bonos seguros y garantizados. Según el New York Times, la raíz de los problemas de Puerto rico es el hecho de que 3.7 millones de sus habitantes tienen aproximadamente $87 billones de deudas pendientes (alrededor de $23,000 de deuda por cada hombre, mujer y niño) y por el aumento en el costo de las pensiones. Puerto Rico ha experimentado una disminución en la población y una cifra alta de desempleo causando que la deuda financiera del país pase a un segundo plano y dejando a una población menor y más pobre con la carga de la deuda sobre sus hombros.

Las pérdidas de valor en los bonos de Puerto Rico han sido de tal magnitud que han quedado fuera del mercado de valores. El gobierno se ha visto en la obligación de financiar sus operaciones con créditos de banco y medidas a corto plazo que no son sostenibles. Los bonos de Puerto Rico están ampliamente mercadeados por fondos mutuos locales expedidos por algunas de las firmas de corretaje más grandes en la isla, se encuentran incluidas UBS Puerto Rico, Popular Securities, Inc., y Santander Securities, Corp. Si la situación financiera continua empeorando, se teme que Puerto Rico necesite alguna intervención federal para poder salir de su situación financiera.

La pérdida de los inversionistas atada a la liquidación de activos de los fondos de bonos se estima que ha alcanzado los cientos de millones de dólares. Sin embargo, una cifra total y exacta de los daños es imposible de determinar en estos momentos. Algunos inversionistas ya han realizado reclamaciones a sus casas de corretaje bajo el reclamo que las pérdidas que han sufrido han sido de tal magnitud que se han perdido en una gran parte o de manera completa, sus ahorros de retiro. Estos inversionistas reclaman que las casas de corretajes les vendieron fondos de bonos como unos seguros, estables, como inversiones que producirían ingresos garantizados. Sin embargos, estos fondos de bonos no solamente han sido un riesgo crediticio concentrado en los valores de Puerto Rico sino que también, en el caso de los fondos de apalancamiento (leverage funds) de UBS, utilizaron sobre un 53% en apalancamiento exacerbando así las pérdidas. A manera comparativa, en cuanto a los fondos de bonos municipales en los Estados Unidos solamente se permite utilizar alrededor de la mitad del apalancamiento utilizado por UBS.

Capstone Asset Planning Company Fined Over Misleading Church Bond Mutual Fund Disclosures

October 19, 2013 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned Capstone Asset Planning Company (CAPCO) alleging that from 2010 through 2012, CAPCO distributed communications to the public concerning the Capstone Fund that failed to accurately reflect the change in the fund’s performance. In addition, FINRA alleged that the Capstone Fund’s website contained a misleading statement concerning the fund’s redemption policy and compared church bonds to corporate bonds without disclosing the material differences between them. As a result, FINRA found that CAPCO violated the content and communications standards under Rules 2210(d)(1)(A), 2210(d)(2)(B), and 2210(d)(2)(B).

CAPCO is a brokerage firm with one office in Houston, Texas, and 22 registered representatives. CAPCO is a mutual fund underwriter and is a subsidiary of Capstone Financial Services, Inc. CAPCO served as the principal underwriter and distributor of shares of the Capstone Church Capital Fund (Capstone Fund). Capstone Fund’s holdings were approximately 87% church mortgage bonds and 13% church mortgage loans. From 2009 to 2012, the net assets of the Capstone Fund declined as a result of the decrease in the fair value of the fund’s assets. The Capstone Fund stopped accepting sales on January 24, 2013.

Under NASD Rule 2210(d)(1)(A) communications must be “based on principles of fair dealing and good faith,” “fair and balanced,” and must “provide a sound basis for evaluating the facts in regard to any particular security.” Similarly, NASD Rule 2210(d)(1)(B) prohibits members from making “false, exaggerated, unwarranted or misleading statement or claim in connection with any communication.”

Gana LLP Investigates UBS Puerto Rico, Popular Securities, and Santander Securities Sales of Puerto Rican Bond Funds

October 8, 2013 | by Staff Attorney

The steep decline in prices of Puerto Rican bonds has caused local investors substantial investment losses in assets that many are claiming were sold to them as safe and secure bonds. According to a New York Times article, Puerto Rico’s woes stem from the fact that its 3.7 million residents have approximately $87 billion of debt outstanding (about $23,000 of debt for every man, woman, and child) and spiraling pension costs. Further, Puerto Rico has experienced a rapidly declining population and double-digit unemployment causing the debt to be left behind to a smaller and poorer population to shoulder the debt burden.

Bond losses have been so great that Puerto Rico has been effectively shut out of the bond market and is now financing its operations with bank credit and other short-term measures that are unsustainable. The commonwealth’s bonds are widely held by local mutual funds issued by Puerto Rico’s largest brokerage firms including UBS Puerto Rico, Popular Securities, Inc., and Santander Securities, Corp. If the situation continues to worsen some fear that Puerto Rico will need some sort of federal action and bailout, an action without precedent.

Investor loss estimate tied to the bond fund sell-off have reached hundreds of millions of dollars. However, an accurate tally of the total damages is impossible at this time. Some investors have begun filing claims against their brokerage firm claiming that the losses have substantially or completely wiped out their retirement savings. These investors have claimed that their brokerage firm sold the bond funds as safe, stable, income producing investments. However, the bond funds not only had concentrated credit risk in Puerto Rican securities but also, in the case of the UBS leveraged funds, employed leverage of over 53%, exacerbating the losses. Comparatively, municipal bond funds domiciled in the United States are allowed to use only about half as much leverage as employed by the UBS funds.

Announcement: David I. Wax Joins Gana LLP

October 4, 2013 | by Staff Attorney

Gana Weinstein LLP is pleased to announce that it has added David I. Wax as of counsel to the firm. Mr. Wax brings to the firm significant experience managing complex commercial litigation matters from inception and discovery through motion practice and trial. Mr. Wax has represented a variety of clients over the course of his career, from individual investors to large financial institutions. Mr. Wax’s current practice focuses on providing outside general counsel services to rapidly growing small businesses as well as general litigation. By adding Mr. Wax as of Counsel, Gana Weinstein LLP has strengthens its core securities arbitration & litigation practice and diversifies its practice.

Adam Gana Selected to the National Lawyers Top 100 Trial Lawyers

October 1, 2013 | by Staff Attorney

Adam Gana is selected to the National Trial Lawyers Top 100 Trial Lawyers. The attorneys selected for this prodigious honor are selected by invitation-only and is composed of the premier trial lawyers from each state in the nation who meet detailed and mandatory qualifications as civil plaintiff and/or criminal defense trial lawyers. Selection is based on a multi-phase process which includes peer nominations combined with third-party research. Membership is extended only to the select few of the most qualified attorneys from each state who demonstrate superior qualifications of leadership, reputation, influence, stature and public profile.

According to the National Trial Lawyers each member of the top 100 members posses the knowledge, skill, experience and success held by the finest and best attorneys in America. The National Trial Lawyers is devoted to protecting and preserving justice for all. Through networking and legal seminars, The National Trial Lawyers provides a competitive edge to attorneys already at the top of their field. To learn more about Mr. Gana’s nomination please visit:

http://www.thenationaltriallawyers.org/profile-view/Adam/Gana/4471/

Adam Gana Ranked as 10/10 on Avvo.com

September 27, 2013 | by Staff Attorney

Avvo is a free website that helps consumers review attorneys and also provides an expert-only question and answer forum where people can ask legal questions. Launched in 2007, Avvo has developed a rating scale for lawyers based upon a proprietary algorithm. Recently Avvo ranked Adam Gana a “10/10” for his experience, skill, and industry recognition. To view his profile, please visit: http://www.avvo.com/attorneys/10123-ny-adam-gana-1017004.html

Adam Gana Quoted In Reuters Article “How Lawyers Who Chase Brokers Invest Their Own Money”

September 26, 2013 | by Staff Attorney

Gana Weinstein LLP’s Adam Gana was quoted today in a Reuters article exploring the investing habits of several attorneys who prosecute securities fraud cases against brokerage firms and individuals. Having seen many investments go sour through unforeseen risks and failure to disclose, the attorneys featured stated that they tended to invest in more traditional investments such as stocks and bonds rather than complex and novel products. In addition, the attorneys gravitated toward lower costing investments such as individual stocks, bonds, municipal bonds, rather than mutual funds or bond funds that charged high fees.

The full length article can be found at: http://www.reuters.com/article/2013/09/26/lawyers-invest-idUSL2N0HL1JI20130926

September 26, 2013 (New York) – Adam Gana is quoted by Suzanne Barlyn of Reuters in her article entitled “How Lawyers Who Chase Brokers Invest Their Own Money.”

How to Investigate your Investment Adviser or Broker Before You Invest

September 19, 2013 | by Staff Attorney

Most investors chose there financial advisers based on the broker’s personality. However, that is a mistake. Liking your financial adviser is important, but before you invest your life savings with someone, there are seven steps you should take:

1. Know your investment objectives and try to properly articulate those objectives to your adviser. Are you looking for growth or income producing securities? Is a tax advantage strategy most appropriate for you? What are your retirement goals? These are all questions you must ask yourself before seeking an adviser.

2. Get references. Ask friends and family for the names of brokers that have served them well over the years. After choosing the adviser, ask the adviser to provide additional client references that you can call to get a better sense of the broker and his or her general trading strategy.

Morgan Stanley pays fines to State Regulators over Exchange Traded Funds (ETFs)

July 30, 2013 | by Staff Attorney

The New Jersey Bureau of Securities alleged that Morgan Stanley violated state securities laws and regulations in connection with the sale of non-traditional Exchange Traded Funds (ETFs), including leveraged ETFs and inverse leveraged ETFs.

Non-traditional ETFs use derivatives and debt to magnify market returns. There are several types of non-traditional ETFs. Leveraged ETFs are designed to deliver two or three times the performance of the index or benchmark they track. Inverse-leveraged ETFs are designed to deliver multiples of the opposite of the performance of the index or benchmark they track. These non-traditional ETFs can present a significant amount of risk that the general public may not realize.

In 2009 the Financial Investment Regulatory Authority (FINRA) released Notice 09-31 drawing attention to the “highly complex” nature of the ETF, while also reminding firms of their sales practice obligations in connection with leveraged and inverse ETFs. In a statement, Abbe R. Tiger, Chief of the New Jersey Bureau of Securities, said investigators “found that Morgan Stanley’s staff lacked proper training about non-traditional ETFs, and that the company failed to adequately supervise its personnel handling ETF transactions, to the detriment of investors.” As part of its settlement with the Bureau, Morgan Stanley was ordered to pay $100,000 in penalties and costs. Morgan Stanley has also already paid restitution to some investors.