The Investor's Lawyer - by Georgia Securities Lawyer Joel Beck

SEC Sanctions Ameriprise for Undisclosed Compensation

This week the SEC announced that it settled an action against Ameriprise Financial Services to resolve allegations that the firm received undisclosed sales compensation with connection with its sales of investments in REITS (real estate investment trusts) offered by two entities, and that it sold millions of dollars of unregistered shares of one REIT, running afoul of the securities registration laws.  The SEC's release notes that, from 2000 to May 2004, Ameriprise received about $30.8 million in undisclosed compensation in connection with the offer and sale of certain REITs to customers.  These additional payments were not disclosed by Ameriprise or the REITS in offering materials.  Robert Khuzami, Director of the SEC's Division of Enforcement is quoted in the release as stating, "Few things are more important to investors than getting unbiased advice from their financial advisers" and "Ameriprise customers were not informed about the incentives its brokers had to sell these investments."  As a result of this action, the SEC censured Amerprise, and Ameriprise will pay a monetary fine and disgorgement totaling $17.3 Million.

Before you invest, understand, as best you can, what's in it for the broker and firm making the recommendation of the security to you.

PIABA Files Petition with SEC Regarding Investor Arbitration

PIABA, the Public Investors Arbitration Bar Association, has filed a petition with the SEC, asking the SEC to eliminate arbitration rules that require that an arbitrator somehow affiliated with the securities industry sit on an arbitration panel involving customer claims against the industry in cases involving claims of damages over $100,000.  According to the petition, "Requiring investors who believe they have
been wronged by the securities industry to have claims decided by panels that must include a representative of that securities industry creates at the least the appearance of bias, if not actual bias." 
PIABA's proposal would not seek to end the industry arbitrator position all together, but to give parties the option of choosing to have a panel consisting of entirely "public" arbitrators.  PIABA's petition can be found at the organization's website here.

Been a Victim of Broker Fraud? Don't Go the Felon Route!

If you've been the victim of stockbroker fraud or misconduct, you have options.  You do not have to take measures into your own hands as a four retirees in Germany reportedly did recently.  According to these news articles (see here and here), the four retirees, aged 60 to 70, angry about losses in investments they made, kidnapped their financial advisor from his home in Germany, holding him prisoner for several days. After getting a message out to call police, the advisor was rescued and the group dubbed the geritol gang was arrested. 

Remember, you need not resort to major felonies to seek to recover your losses.  Though there may be some downsides to the securities arbitration process, I've never seen it involve doing time in prison.

SEC Pursues Charges for Ficticious Investments

A mantra of this blog is to check before you invest.  Investigate and understand.  After all, it's your money on the line.  Recently, the SEC announced that it has instituted proceedings against an investment adviser who sought clients to invest in "federal housing certificates" that were to pay up to 12% per year, risk-free and tax free.  These "investments" did not actually exist, and the investment adviser allegedly misappropriated the clients' funds, while allegedly sending out bogus account statements to the clients. 

The news is full of stories about government programs  - national, state and local - designed to stimulate the economy and help citizens.  You can be sure that crooks read the newspapers too, and will attempt to make their schemes and scams appear to be a legitimate part of the government bailouts and assistance for citizens.  Don't be a victim.  Investigate before you invest. 

Don't Become a Ponzi Scheme Victim

Ponzi schemes.  They're in the news this year, and many folks have discovered that their "investment" turned out to be in a fraudulent scheme.  According to news releases from the Securities and Exchange Commission, the SEC initiated legal action over five ponzi schemes this month (April 2009) alone.  So what exactly is a ponzi scheme, and how do you keep from becoming a victim?

Securities Arbitration Case Filings Up in 20009

According to FINRA Dispute Resolution, January and February 2009 saw a total of 1,065 arbitration claims filed in their arbitration forum.  This increase from a total of 561 cases filed this same period in 2008 represents a 90% increase in year to date filings.  Overall, in 2008, 4,982 cases were filed with FINRA Dispute Resolution, a 53% increase over 2007, when there were 3,238 cases filed.

Criminal Charges Filed Against Lawyer Robert Copeland in Connection with Marietta, Georgia PONZI Scheme

As reported in an earlier post, last week the SEC brought a civil action against Georgia attorney Robert P. Copeland in connection with an apparent Ponzi scheme that was alleged to have defrauded investors out of millions of dollars.  This week, US Attorney David Nahmias brought criminal charges against Copeland, alleging that he committed wire fraud, in connection with a Ponzi scheme that operated from 2004 to 2009.  In the fraud, according to the US Attorney's office, Copeland deceived more than one hundred investors out of millions of dollars, promising them returns of up to 15% on their money.  Copeland, in addition to soliciting investors himself, obtained investor funds through sales made by financial advisors whom he paid a commission.

Its too early to tell if investors will receive any of their funds returned as a result of the civil and criminal charges brought against Copeland.  Importantly, investors whose stockbrokers or financial advisors sold the Copeland investment to them may have other avenues available to them to seek compensation for their losses.  If you invested in the Robert Copeland ponzi scheme through a financial advisor or stockbroker, you should immediately consult with a securities attorney.  Joel Beck of The Beck Law Firm, LLC, a former NASD Enforcement Attorney, represents investors in securities arbitration cases.  If you believe you've been the victim of broker fraud, contact The Beck Law Firm, LLC today for a consultation. 

The Beck Law Firm Investigates Marietta, Georgia Ponzi Scheme

Recently, The Beck Law Firm has been contacted by investors who invested in an apparent ponzi scheme operated in Marietta, GA.  According to a report from the Atlanta Journal-Constitution, Marietta attorney Robert Copeland, who has not been criminally charged, was sued by federal authorities, and was alleged to have defrauded investors out of more than $30 Million. 

It appears that investors were investing in a "private mortgage lending" program and told that their investment, which was safe and to be secured by real estate, would earn them returns of 15% or more.  It also appears that the investments were made with various entities possibly controlled by Copeland, including "Advanced Asset Strategies"

Its too early in the investigation by federal authorities to determine whether investors will be able to recoup any of their investment with the help of the authorities.  However, for those investors who purchased their investment through a stockbroker, they may have options to seek the return of their investment from the broker and brokerage firm through FINRA securities arbitration.  Those investors should immediately contact an experienced securities attorney for a consultation.

If you believe you've been the victim of broker fraud, contact The Beck Law Firm, LLC today for a consultation to discuss your potential claims. 

"Reasoned" Arbitration Awards

FINRA announced that the SEC has approved a new rule for FINRA arbitration cases that will allow parties to jointly request a reasoned, or explained,  arbitration award, beginning in mid-April 2009.  According to the Notice announcing the rules' implementation

An explained decision is a fact-based award stating the general reasons for the arbitrators’ decision.
Parties will be required to submit any joint request for an explained decision at least 20 days before the first scheduled hearing date. The chairperson of the arbitration panel will write the explained decision and will receive an additional honorarium of $400 for doing so.

Currently, arbitration awards are very brief, stating a very short summary of the claimant's claims, a brief statement of the respondent's defenses, the damages sought by the claimants, and any award issued by the panel.  There is generally no explanation of why the panel did what it did, based on either the facts, the law, or both.  As a result, appeals from arbitration awards are very difficult, and it is very hard to prove that the arbitration panel acted in manifest disregard of the law or abused their discretion in hearing the matter.

Under the new rules, explained awards will only be written if all parties agree.  These awards will contain an explanation of the award, but is not required to include legal citations or damages calculations.  It will be interesting to see how many explained awards are handed down.  My early sense is that the parties will not agree to them in most cases and investors who may often seek the awards, will be opposed on this front by respondents. 

FINRA Announces Changes to Arbitration Panels

In Regulatory Notice 09-13 issued this week by FINRA, the regulator announced changes to the arbitration code of procedure relating to the number of arbitrator panels for certain cases. 

Pursuant to changes to Rule 12401 and 13401, arbitration claims for less than $100,00 will be heard by a single chair-qualified arbitrator, unless all parties agree in writing that the matter should be heard by a 3-person panel.  This change becomes effective March 30, 2009, for all cases filed on or after that date.

Currently, arbitration claims seeking damages of between $25,000 and $50,000 are heard by a sole arbitrator, unless a party asks for a panel of three.  With the changes, the claims threshold is raised from $50,000 to $100,000, and it requires consent of all the parties to have a 3-person panel.

What does this mean for investors?  If your case seeks damages falling within this range, you'll likely only get one person as a judge (arbitrator) instead of three.  If that one person is a good arbitrator, that may be a good thing.  But if not, it may be disastrous for your case.  If a case is to be decided by a sole arbitrator that person will be a public arbitrator (not from the industry roster (3-person panels are two public and one industry), and will also be qualified to serve as chair of a 3-person panel.

There appears to be an exception in the revised rules:  if the claim seeks unspecified damages, a 3-person panel will be appointed.