Following up on the last posting here, it seems that rigorous due diligence and accurate reporting of risk actually may not have been a high enough priority in the mortgage-backed securities business, not when there was so much to be made off unsuspecting investors induced to buy into this hyped market. Thus, the New York state attorney general’s probe into the mortgage-backed securities industry is reported to be heating up after Clayton Holdings, Inc., a full service management firm catering to players in the MBS business, struck a deal with the AG. Read the rest of this entry »

Investors are numb from losses attributable to investments in collateralized debt instruments linked to the residential sub-prime mortgage meltdown and continuing market volatility from a variety of other causes. The question is, what should they do now? It may be time to contact a professional to explore the options. Read the rest of this entry »

As predicted, the U.S. Supreme Court dropped the other shoe this week when it spurned putative class action investor attempts to get the Court to review their case against “secondary” players (financial institutions such as Merrill Lynch and Credit Suisse), who were alleged to have participated in the activities leading to the Enron collapse in 2001. Read the rest of this entry »

The big business oriented majority on the U.S. Supreme Court has again asserted (this time in Stoneridge Investment Partners v. Scientific-Atlanta Inc.) the Court’s narrow view of the ability of investors to seek redress under the securities laws unless investors can show actual “reliance” on the behavior/communications of secondary actors such as banks and accountants. As already noted in the media, the decision may not bode well for a pending class action suit by Enron investors against investment banks. (see Linda Greenhouse, “Supreme Court Limits Lawsuits by Shareholders,” (N.Y. Times, January 16, 2008)). Read the rest of this entry »

Is mandatory securities arbitration on the way out? If Congress (either this year or under a new administration come January 2009) and the state securities regulators at NASAA (the North American Securities Administrators Association) have their way, two of investors’ biggest complaints may become a thing of the past: mandatory securities arbitration AND the mandatory securities industry arbitrator now required to sit in judgment of securities fraud and other investor claims (on three-member arbitration panels as a so-called “non-public” arbitrator).

We’ve supported both reforms vigorously for over twenty years in places where it should count, making the case for prohibiting the fundamentally unfair and unconstitutional predispute imposition of these mandatory requirements on investors: Read the rest of this entry »

Now that we’ve turned the corner into the New Year – though not quite leaving behind the lingering geo-political crises, turmoil in the markets, the health care morass and the housing/mortgage debacle, among other socio-economic woes – it might be timely to revisit some of our own basic themes here at the Securities Fraud Hotline, like banning mandatory arbitration of investor disputes AND returning to investors the right and choice to go to court (or an alternative forum independent of the brokerage industry) to have a judge and jury assess their grievances. Read the rest of this entry »

We previously posted that FINRA has imposed a $3 million fine against Morgan Stanley; the firm must also fork over a $9.5 million “Discovery Fund,” all to benefit customers in settlement of the firm’s failure in securities arbitration to produce emails ostensibly “lost” in the tragic World Trade Center attacks in 2001 (some of which “surfaced” years later). In fact, Wall Street’s email record retention has had a checkered track record at a number of firms. Several years ago for example in December 2002 the SEC, NASD and NYSE imposed an $8.25 million penalty against Deutsche Bank Securities Inc., Goldman, Sachs & Co., Morgan Stanley & Co. Incorporated, Salomon Smith Barney Inc., and U.S. Bancorp Piper Jaffray Inc. for failure to maintain and/or preserve email communications. Read the rest of this entry »

When Morgan Stanley Co.’s former affiliate, Morgan Stanley DW, Inc., withheld e-mail evidence from litigants for several years, on the shameless pretense that they were “lost” in the aftermath of the September 11, 2007 attacks on the World Trade Center in New York, it was estimated by FINRA that several thousand customers were affected. The suppression of important evidence may have potentially denied securities arbitration and court litigants the ability to recover on some or all of their claims filed in court or at the self-regulatory, industry run arbitrations such as those administered by FINRA and its predecessor dispute resolution forums (the NASD and NYSE). The failure to produce such evidence during the pendency of cases would also have had a profound effect on the amounts accepted in settlements. Read the rest of this entry »

Making Securities Arbitration Fair for Investors: NASAA, the North American Securities Administrators Association committed to investor protection, has come out strongly in favor of “prohibiting broker-dealers from requiring investors to accept mandatory arbitration clauses” and in support of passage of the “Arbitration Fairness Act of 2007,” which is pending in both the Senate (S.1782) and the House of Representatives (H.R. 3010) in the U.S. Congress. Read the rest of this entry »

Investor Rights: FINRA’s launch this month of Regulatory Notice 07-55, with its pointed incorporation by reference to Notice to Members 97-19, begs at least two questions: what has been the efficacy of oversight and enforcement in the ensuing 10 years, when investors have seen their fair share of sales practice abuses, and what will be done going forward to ensure oversight of sales practice abuses before investors are harmed? After all, the guidance offered in NTM 97-19 in 1997 was based on supervisory and compliance rules, actually then in effect, governing the supervision by financial services/brokerage firms of registered persons with a negative disciplinary background. Read the rest of this entry »