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Archive for October, 2012


FINRA Statistics thru September 2012

Summary Arbitration Statistics September 2012

 

New Case Filings through September:
2010 2011 2012 2012 vs 2011
4,279 3,705 3,394 -8%
 

Number of Cases Closed through September:

2010 2011 2012 2012 vs 2011
4,709 4,489 3,747 -17%
 

Turnaround Time* (in months) through September:

  2010 2011 2012 2012 vs 2011
Overall 12.4 14.2 14.5 2%
Hearing Decisions 14.8 15.9 16.6 4%
Simplified Decisions 6.4 6.3 7.2 14%

FINRA opens arbitration to RIA’s

InvestmentNews reports:

The Financial Industry Regulatory Authority Inc. has opened up its arbitration system to registered investment advisers.  Finra arbitration has been used in investor or industry complaints involving securities firms and broker-dealers. RIAs now can use the system, according to Linda Feinberg, president of Finra’s office of dispute resolution.

Ms. Feinberg disclosed the change Thursday in Austin, Texas, at the annual meeting of the Public Investors Arbitration Bar Association.

Appellate Court decides in favor of Horace Grant

An U.S. appeals court has upheld a $1.45 million arbitration award in favor of retired NBA basketball player Horace Grant, who sought reimbursement for losses from risky bond funds that were marketed as safe.

The U.S. Court of Appeals for the Ninth Circuit, according to an unpublished decision, rejected claims by Grant’s former brokerage, Morgan Keegan, that arbitrators in the case might have been biased, prejudged the outcome or exceeded their power.

It was the second big loss in less than a week for Morgan Keegan, a unit of Raymond James Financial Inc. Earlier this week, another appeals court ruled in favor of investors in a $9.2 million award. In each case, investors lost money after investing in a group of risky bond funds.

FINRA sanctions David Lerner $14 million for unfair practices in sale of REIT

The Financial Industry Regulatory Authority (FINRA) announced today that it has ordered David Lerner Associates, Inc. (DLA) of Syosset, NY, to pay approximately $12 million in restitution to affected customers who purchased shares in Apple REIT Ten, a non-traded $2 billion Real Estate Investment Trust (REIT) DLA sold, and to customers who were charged excessive markups. As the sole distributor of the Apple REITs, DLA solicited thousands of customers, targeting unsophisticated investors and the elderly, selling the illiquid REIT without performing adequate due diligence to determine whether it was suitable for investors. To sell Apple REIT Ten, DLA also used misleading marketing materials that presented performance results for the closed Apple REITs without disclosing to customers that income from those REITs was insufficient to support the distributions to unit owners. FINRA also fined DLA more than $2.3 million for charging unfair prices on municipal bonds and collateralized mortgage obligations (CMOs) it sold over a 30 month period, and for related supervisory violations.

 In addition, FINRA fined David Lerner, DLA’s founder, President and CEO, $250,000, and suspended him for one year from the securities industry, followed by a two-year suspension from acting as a principal. David Lerner personally made false claims regarding the investment returns, market values, and performance and prospects of the Apple REITs at numerous DLA investment seminars and in letters to customers. To encourage sales of Apple REIT Ten and discourage redemptions of shares of the closed REITs, he characterized the Apple REITs as, for example, a “fabulous cash cow” or a “gold mine,” and he made unfounded predictions regarding a merger and public listing of the closed Apple REITs, which he inappropriately claimed would result in a “windfall” to investors.

 FINRA also sanctioned DLA’s Head Trader, William Mason, $200,000, and suspended him for six months from the securities industry for his role in charging excessive muni and CMO markups. The sanctions resolve a May 2011 complaint (amended in December 2011) as well as an earlier action in which a FINRA hearing panel found that the firm and Mason charged excessive muni and CMO markups.

Former Houston based attorney pleads to Ponzi scheme

A former attorney in Houston who portrayed himself as a real estate investment tycoon has pleaded guilty in a $7.8 million Ponzi scheme.  Federal prosecutors in Houston say 67-year-old Billy Frank Davis pleaded guilty Monday to wire fraud. Investigators say more than 20 investigators were scammed.  Prosecutors say Davis during the past 10 years pretended to be in the real estate investment business. He used money from investors to pay his previous debts and fund his personal lifestyle.  Davis faces up to 20 years in prison when he’s sentenced in early 2013.

SEC charges San Francisco investment adviser and its owner for fraud

The Securities and Exchange Commission brought fraud charges against San Francisco-based hedge fund manager Hausmann-Alain Banet and his firm Lion Capital Management. According to the SEC’s complaint, Banet stole more than a half-million dollars from a retired schoolteacher who thought she was investing her retirement savings in Banet’s hedge fund.

According to the SEC’s complaint filed against Banet and Lion Capital Management in federal court in San Francisco, Banet led the teacher to believe that his hedge fund would invest in the stock market using a long/short equity investing strategy. Instead, Banet brazenly took the teacher’s investment totaling $550,000 and used it to pay unauthorized personal and business expenses, including his home mortgage, office rent, and staff salaries. Banet also provided phony account statements showing non-existent investment gains and listing an independent administrator that performed no actual work for the fund.

As a result of the conduct described in the Complaint the SEC alleges that Lion Capital and Banet violated Section 17(a) of the Securities Act, Section 10(b) of the Exchange Act and Rule 10b-5 thereunder, and Sections 206(1), 206(2), and 206(4) of the Advisers Act and Rule 206(4)-8 thereunder. The SEC seeks permanent injunctions, disgorgement including prejudgment interest, and civil penalties from Lion Capital and Banet.

Former IndyMac CEO settles with SEC

The U.S. Securities and Exchange Commission today announced that on September 28, 2012, the United States District Court for the Central District of California entered a settled final judgment as to Michael W. Perry, the former Chief Executive Officer and Chairman of the Board of IndyMac Bancorp, Inc. IndyMac, through its main subsidiary, IndyMac Bank, primarily made, purchased, and sold residential mortgage loans. In July 2008, IndyMac Bank was placed under Federal Deposit Insurance Corporation receivership and IndyMac filed for bankruptcy. The Commission’s complaint alleges that IndyMac and Perry, in connection with IndyMac’s first quarter 2008 Forms 10-Q and 8-K and related earnings call, all dated May 12, 2008, failed to disclose that IndyMac Bank had only been able to maintain its well-capitalized regulatory status by retroactively including in IndyMac’s first quarter capital balance an $18 million capital contribution from IndyMac to IndyMac Bank, even though it was made on May 9, 2008, over five weeks after the end of the first quarter.

Without admitting or denying the allegations in the complaint, Perry consented to the entry of the Final Judgment permanently enjoining him from future violations of Section 17(a)(3) of the Securities Act of 1933, and ordering him to pay a civil penalty in the amount of $80,000.

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