Have You Been the Victim of a Ponzi Scheme?

Have You Been the Victim of a Ponzi Scheme?

A Ponzi scheme is a fraudulent investment program where the perpetrator uses newer investors’ money to pay alleged “investment returns” to earlier investors. A typical Ponzi scheme lures investors with promises of above-market rates of return. The use of newer investors’ money to make alleged investment return payments to earlier investors gives the fraudulent appearance of a properly functioning and successfully performing investment strategy. A Ponzi scheme can continue as long as the fraudster is able to get new investors to invest into the scheme.

What to Look for in a Ponzi Scheme

Many Ponzi schemes have common characteristics. Some of the red flags of a potential Ponzi scheme include the following:

  • Above-market returns with supposedly little or no risk. Every investment carries some degree of risk, and the risk/reward paradigm dictates that higher yielding investments typically involve more risk. Be highly suspicious of any “guaranteed” investment opportunity.
  • Significant rate of return. Even where the investment is represented to be risky, the promised investment returns often are much greater than other risky investments.
  • Overly consistent returns. Investments tend to go up and down over time. Be skeptical about an investment that regularly generates positive returns regardless of overall market conditions. (Many Bernie Madoff investors failed to recognize or ignored this red flag.)
  • Unregistered investments. Ponzi schemes typically involve investments that are not registered with the SEC or with state regulators. While some unregistered investment are legitimate, registration is important because it provides investors with access to information about the company’s management, products, services, and finances.
  • Unlicensed sellers. Federal and state securities laws require investment professionals and firms to be licensed or registered. Many Ponzi schemes involve unlicensed individuals or unregistered firms.
  • Secretive, complex strategies. Avoid investments if you don’t understand them or if the seller refuses to provide full, intelligible disclosures about the investment strategy.
  • Sloppy or inaccurate paperwork. Account statement errors may be a sign that funds are not being invested as promised.
  • Difficulty receiving payments. Be suspicious if you don’t receive a payment or have difficulty cashing out. Ponzi scheme promoters sometimes try to prevent participants from cashing out by offering even higher returns for staying in the investment.
  • Representations of exclusivity. that not all investors have access to the investment. (Bernie Madoff used this technique to great success.)

 Call a Los Angeles Fraud Attorney Today

Many very savvy investors have been taken advantage of by unscrupulous Ponzi scheme promoters. Two of the most notorious and largest Ponzi schemes were Bernie Madoff and Allen Stanford, each of which involved the theft of billions of dollars from unsuspecting investors. If you made an investment only to find out that it was a Ponzi scheme, or if you believe you have invested in one, you should contact an experienced Los Angeles fraud attorney today for a free consultation to discuss your legal rights.


Misrepresenting the Risk of Collateralized Debt Obligations

Misrepresenting the Risk of Collateralized Debt Obligations

A collateralized debt obligation (CDO) is a form of structured asset-backed security that may include mortgage-backed securities. CDOs are funded by investors who are then repaid in a prescribed order of priority according to the seniority of the investment, which is also known as a “tranche.”

The CDO collects money when payments are made on the loans that are held within the CDO, and then the CDO investors are paid based on the priority of the CDO tranche that they own. When some loans within the CDO default and the money collected by the CDO is insufficient to make payments to all CDO investors, those investors with the least seniority are paid back last, and sometimes not at all.

When Should You Invest in a CDO?

Generally speaking, investing in a CDO is safest if your seniority places you at the top of the payment priority, and becomes more risky depending on your prescribed tranche. You should be aware of the risks of such an investment, especially if your broker is selling you a junior tranche that generally is more risky than the more senior tranches.

Call a Los Angeles Securities Lawyer Today

Investors often rely on their broker or brokerage firm to provide sound advice when it comes to investing in CDOs. If your broker misrepresented or misled you regarding a collateralized debt obligation, and failed to properly advise you of the inherent risks of a CDO, you should contact an experienced Los Angeles securities lawyer for a free consultation to discuss your legal rights.

Los Angeles Area Securities Employment Dispute Resolution

Securities and investment industry employees and professionals often have performance-based compensation, such as bonuses or other compensation that is tied to business generation, trading desk P&L, or other work performance. Bonus disputes or compensation disputes can arise between securities employees and their brokerage firms or investment banks that require the help of an experienced attorney to resolve.

Instances of Securities Employment Issues

Common issues that arise in the securities field can include:

  • Compensation or bonus disputes
  • U4 or U5 expungement
  • Promissory note or loan disputes

If you left your job and did not receive the severance package or bonus to which you were entitled or promised, you may be able to pursue a claim to recover money that you believe you are owed. Further, if you believe customer dispute information or termination information incorrectly appears on either your U4 or U5, you may be able to have it expunged from your record or altered. Finally, there are instances in which you may be forgiven from certain forgivable loans or promissory notes.

Call a Los Angeles Securities Attorney Today

If you are involved in a bonus dispute or compensation dispute, wish to expunge something from your U4 or U5, or have grounds not to repay a promissory note or forgivable loan, contact an experienced Los Angeles securities attorney today for a consultation to discuss your legal rights.

Identifying Employee Benefits Violations Under ERISA

Identifying Employee Benefits Violations Under ERISA

If you work for a company that offers benefits as part of your compensation package, the Employee Retirement Income Security Act of 1974 (ERISA) is a federal law that sets minimum standards for most voluntarily established pension plans in private industry to provide protection for individuals in these plans. Many business owners or managers are not properly qualified to evaluate pension plans, profit-sharing plans, or 401(k) plans, so they rely on investment professionals to do so. When an investment professional is in charge, they assume the legal duty to investigate and evaluate investments in the plan and how to handle the investments in a prudent manner.

What Actions are Considered Violations Under ERISA

Violations in a 401(k), pension, or profit-sharing plan include:

  • Failing to operate the plan prudently for the benefit of the participants
  • Failing to use the most cost-effective funds within a plan
  • Using plan assets to benefit only certain members of the plan
  • Failing to follow the plan terms.

Call a Los Angeles Securities Attorney Today

When your pension or profit-sharing plan or 401(k) is mismanaged or fails to use the most cost-effective funds, the plan can lose value your broker or your employer may be liable. You may have certain legal rights under ERISA as an employee. Contact an experienced Los Angeles securities attorney today to discuss these rights.

Shareholder Derivative Litigation and Shareholder Rights

Corporate officers and directors of any company are required to act in the best interests of the company. At times, however, officers or directors put their own interests ahead of the company and ahead of the shareholders they are supposed to represent.

Conduct to Look Out For

You should be concerned if you notice that officers or directors act in one of the following manners, which are inconsistent with the company’s (and your) best interests:

  • Preferential stock treatment
  • Back-dated stock options or stock fraud
  • Preferred funding treatment in a proposed merger
  • Improper management or fraud
  • Any other action where a shareholder or the corporation suffers harm.

When those in charge act in a way that harms the company or the shareholder, a shareholder derivative lawsuit can be filed. This is a lawsuit filed on behalf of the shareholders to remedy the wrongs caused by corporate officers.
Call a Los Angeles Securities Lawyer Today

Not every unwise management decision is actionable. Corporate leadership generally has broad discretion in making business decisions. But when officers or directors act in a way that is contrary to the best interests of a corporation and its shareholders, you may have certain legal rights as a shareholder. Contact an experienced Los Angeles securities lawyer today to discuss your shareholder rights.

Dealing With Unregistered Brokers or Brokerage Firms

Dealing With Unregistered Stockbrokers or Brokerage Firms

Most securities broker-dealers are required to register with the SEC and state securities regulators, as well as the Financial Industry Regulatory Authority. According to the SEC, a broker is defined broadly as any person engaged in the business of effecting transactions in securities for the accounts of others, including investment advisors, finders, those who operate platforms to trade securities, financing and even those who provide support services to registered broker-dealers, among many others. Similarly most securities must be registered with regulatory authorities in order to be sold to investors.

Potential Registration Warning Signs

  • Failed investments
  • Sales of unregistered securities
  • Negligence or broker misconduct
  • Stock fraud

Both state and federal securities laws exist to protect consumers from unlicensed activity. Certain situations can provide grounds for a securities registration class action, through which investors can seek to rescind any transactions involving unregistered securities or the unregistered brokers and firms selling the securities. FINRA arbitration claims also can be filed regarding the same wrongdoing.

Call a Los Angeles Stockbroker Fraud Attorney Today

If you believe you have dealt with an un licensed stock broker, brokerage firm, or security, you may have certain legal rights that require your immediate attention. You should contact an experienced Los Angeles stockbroker fraud attorney as soon as possible to discuss your rights.

What is Price Fixing?

Many people often as what is price fixing? Price fixing is an agreement among competitors to raise, lower, or stabilize pricing of products or services. Generally, antitrust laws in the United States require that each company establish its own pricing and terms based on market supply and demand, rather than collude with competitors to determine pricing or terms that are not driven by fair competition and market forces. When competitors join together to agree upon pricing of products or services, the pricing is usually higher than it would be if it had been determined by normal market forces.

Types of Price Fixing

While not all price similarities among competitors are the result of price fixing, there are several different ways companies conspire to collude on pricing or otherwise violate the Sherman Antitrust Act, including:

  • Unnaturally high prices
  • Pricing policies (minimum or maximum prices and terms of sale, including financing)
  • Bid rigging
  • Anticompetitive collusion
  • Market division or allocation schemes

Call a Los Angeles Securities Attorney Today

The U.S. Department of Justice generally pursues price fixing violations, while the government handles fines for price collusion and other violations. If you believe you or your company has fallen victim to price fixing, you should contact an experienced Los Angeles securities attorney today to discuss your rights.

What is Investment Fraud & Stockbroker Misconduct?

What is Investment Fraud & Stockbroker Misconduct?

When you are planning for your family’s long-term future, a prudent financial strategy is critical. It is important to know that you can rely on the advice of your stockbroker when deciding how and where to invest your savings in the stock market. Unfortunately, and in an effort to make a sale, a stockbroker might induce you to invest on the basis of false or incomplete information – this is investment fraud, and is also known as stock fraud. This sort of misinformation or incomplete information is just one of several ways that your stockbroker may have committed a violation of securities laws.

Types of stockbroker fraud can include:

  1. Unsuitable or untenable investments
  2. Misrepresentation of Facts
  3. Failure to Diversity or Overconcentration
  4. Churning
  5. Withdrawal of funds without proper authorization

When you speak with a stockbroker, he or she must disclose both the positives and negatives of any particular investment. Investment fraud can result from stockbroker misconduct in many other ways, including as a result of theft or embezzlement, misstatements in public reports, insider trading and much more.

As a result, investors suffer significant losses because they were not told the truth or the risk of an investment. A stockbroker must always explain the nature of an investment – even if you are given only truthful information about a particular investment, a failure or omission to tell an investor about the risks of an investment also constitutes fraud. A stockbroker has a duty to tell you both the good and the bad about any type of investment.

It is important to realize that even if your stocks lose money, it isn’t necessarily investment fraud or stockbroker misconduct. The stock market does rise and fall, and if you are concerned over potential losses you should consult your stockbroker and discuss your investment portfolio and strategy and consider an alternate course of action.

Contact a Los Angeles Securities Fraud Attorney Today

How to Avoid Securities Fraud Churning in Your Investment Portfolio

When a stockbroker buys or sells securities for the primary reason of creating a commission and not because the trade makes financial sense for the investor, this is known as “churning,” and is a violation of SEC rules and securities laws, including SEC Rule 15c1-7 and others. Securities fraud churning is performed by stockbrokers looking to increase their income through a series of trades, often unbeknownst to the investor that may not appear illegal on the surface.

In fact, commissions in connection with excessive trading can make it very difficult for an investment portfolio to be profitable, and goes against the principle that the investor’s interests come first. While it can be difficult to quantitatively measure churning, excessive buying and selling that does not appear necessary to fulfill the investor’s goals and can be considered evidence of churning.

The Financial Industry Regulatory Authority (FINRA), also has a series of rules that include interpretive material on churning, which they call “quantitative suitability.” According to FINRA, “A member or an associated person must have a reasonable basis to believe that a recommended transaction or investment strategy involving a security or securities is suitable for the customer, based on the information obtained through the reasonable diligence of the member or associated person to ascertain the customer’s investment profile. A customer’s investment profile includes, but is not limited to, the customer’s age, other investments, financial situation and needs, tax status, investment objectives, investment experience, investment time horizon, liquidity needs, risk tolerance, and any other information the customer may disclose to the member or associated person in connection with such recommendation.”

Churning can only occur if the broker has the authority to make trades on behalf of the investor at his or her own discretion. Generally speaking, this is typically handled through a formal written discretionary agreement.

How to avoid churning:

  • Maintaining control over your portfolio and requiring your authorization prior to any trade.
  • Use a fee-based account instead of a commission-based account, since this will help make sure your interests are truly aligned with yours and not as a means for financing your stockbroker’s personal accounts with your funding.

Call a Los Angeles Securities Lawyer Today

If you believe your stockbroker has been churning your account, you may have certain legal rights which may require your immediate attention. You should contact an experienced Los Angeles securities lawyer today to discuss your rights.