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Ameriprise Fined Over Short-Term Trades of Closed-End Funds

Ameriprise Financial Services Inc. has agreed to pay a $100,000 fine to the Financial Industry Regulatory Authority (FINRA) after allegations that the company failed to supervise closed-end fund sales resulting in unsuitable short-term trading, according to the settlement agreement.

The fine stemmed from an employee who wrongfully recommended short-term trading of closed-end funds (CEFs) after they were bought at the IPO. According to FINRA, Ameriprise did not have a system in place to prevent the employee’s actions from taking place. The employee has been fired.

FINRA claimed that Ameriprise knew that CEFs purchased at an IPO were more suitable for long-term investment and that the sales charges applied to the short-term trading were unsuitable. Despite that, Ameriprise did not have a procedure in place to prevent the trades from going through. Ameriprise’s lack of oversight violated NASD Rule 3010.

CEFs are a type of pooled investment that offer a fixed number of shares in an IPO and then are traded on an exchange. Ameriprise began selling CEFs in 2010. The firm had guidelines in place regarding short-term trading, but it failed to have a system to prevent these types of transactions. In fact, on at least two occasions supervisors flagged customer accounts with short-term CEF trading but no action ever was taken.

The $100,000 fine came after FINRA determined that Ameriprise identified the short-term trading, investigated the trades, and then fired the individual who was recommending the short-term CEF trades.

Call a Los Angeles Securities Fraud Attorney Today

If your Ameriprise broker made short-term trades with your closed-end funds, you may have certain legal rights that require your immediate attention.

Contact an experienced Los Angeles securities fraud lawyer today for a consultation to discuss your rights and options.

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California Man Caught in $18 Million Bond Scheme

A California resident has agreed to hand over almost $18 million to settle allegations in a Delaware federal court that he bilked approximately 200 investors in a bond scheme between 2007 and 2011, according to the Securities & Exchange Commission (SEC).

Andrew Proctor, acting through his company Atlas JG, is alleged to have raised $22 million by offering investors a return of between 8-9% on their investment. Most of the targeted investors came from Taiwan.

Proctor told investors that their returns would come from purchasing receivables from home-building contractors at a discount, then turning a profit when the builders eventually paid the invoices. Instead, less than 10% of the funds raised were used as promised, with the last legitimate purchase taking place in 2008. According to the SEC, the money was moved through a myriad of shell companies and accounts that made following the trail difficult.

Of the gains Andrew Proctor made, $3 million went to personal use, including mortgage payments, credit cards, and his children’s tuition. Another $7 million was sent to an associate in Hong Kong, and $3.1 million was invested in risky stock and options trades. About $11 million was used to make interest and principal payments to investors.

As part of his settlement, Proctor agreed to pay more than $5 million in fines plus disgorgement of $11 million plus interest.

Call a Los Angeles Securities Fraud Lawyer Today

If you invested with Andrew Proctor or Atlas JG, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities fraud lawyer today for a consultation to discuss your rights and options.

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California Sues Morgan Stanley Over Alleged Securities Violations

California Attorney General, Kamala Harris, has filed a lawsuit against Morgan Stanley, claiming the financial services corporation violated provisions of the False Claims Act and securities laws by concealing the risks of mortgage-backed securities purchased by California state pension funds.

According to the lawsuit, the California Public Employees Retirement System and California State Teachers Retirement System lost hundreds of millions of dollars during the financial crisis on mortgage-backed securities along with “structured investment vehicles” – many of which were underwater.

The complaint alleges that between 2004 and 2007, Morgan Stanley and certain affiliates purchased loans from originators, who then pressured Morgan Stanley to purchase additional loans for securitization. Although Morgan Stanley performed due diligence, it lowered its underwriting standards in order to accommodate investments that once were believed to be too risky to bundle into the securities.

Attorney General Harris claimed that Morgan Stanley used exaggerated appraisals that overstated the values or properties securing the mortgages and was involved in efforts to “move” rating agencies to give the investment a high rating.

Morgan Stanley countered that the securities at issue were marketed and sold to sophisticated investors, and the performance of the mortgage loans was consistent with the sector as a whole. The company has already paid billions to settle claims brought by other investors and agencies, including $3.2 billion in February to settle claims brought by the U.S. Department of Justice and the state of New York, and just one week after the bank agreed to pay $63 million to settle claims with the FDIC to end claims it misrepresented residential mortgage-backed securities sold to three failed banks.

Did You Suffer From Securities Violations Due to Morgan Stanley?

If you are a part of the California Public Employees Retirement System or the California State Teachers Retirement System, you may have certain legal rights that require your immediate attention. Contact an experienced Los Angeles securities fraud lawyer today for a consultation to discuss your rights and options.

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