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Current Investigations
Auction Rate Securities
In late 2007 and early in 2008, investors who purchased auction-rate securities — in the form of preferred shares in closed-end mutual funds, or corporate or municipal bond instruments — are discovering that these securities are hardly the safe, liquid, slightly higher-yielding, tax-exempt alternative to money-market funds that they were marketed as. We are currently investigating the representations made by Wall Street brokerage firms on behalf of institutional and retail customers.
Charles Schwab YieldPlus Fund
Charles Schwab's YieldPlus fund was once marketed as a safe alternative to cash and was Schwab's most popular bond fund. But Schwab stuffed mortgage-backed securities into YieldPlus' portfolio to pump up performance and it turned toxic.
Morgan Keegan Bond Mutual Fund and Closed End Funds
As of December 31, 2007 Regions Morgan Keegan suffered losses as high as 65 percent of NAV for a one year period. Funds, including Regions Morgan Keegan Select Intermediate Bond Fund, Regions Morgan Keegan Select High Income Bond Fund and other affiliated closed end funds suffered losses as a result of portfolio manager Jim Kelsoe's subprime “intoxication.”
Bear Stearns Hedge Funds
In July 2007, the Bear Stearns High Grade Structured Credit Strategies and the Bear Stearns High Grade Structured Credit Strategies Enhanced Leverage Fund announced catastrophic losses in Mortgage Backed Securities (MBS) trading.
Because there is little trading in the securities, current prices may not reflect the highest rate of mortgage delinquencies in MBS securities causing further write downs at the expense of investors.
TICs - Tenant In Common Investments
A Tenant in Common property (“TIC”) allows the seller of real estate to qualify for a 1031 tax free exchange of the property sold in exchange for an ownership interest in another investment property. Brokerage firms have begun selling fractional ownership interests in real estate to persons who have recently sold or are considering the sale of an appreciated piece of property as an alternative investment vehicle that preserves the tax free status of a property exchange.
State Street Bank and Trust Company and State Street Global Advisors, Inc.
Assets in State Street's five bond mutual funds were down sharply in 2007. As of October 2007 assets in the five funds suffered losses of 43% for 2007. The funds were marketed to institutional investors as safe, conservative investments. Investors in the funds included non-profit organizations, private and public sector pension funds and other instructional investors.
CSO Partners Hedge Fund
Citigroup has stopped investor redemptions in its London based hedge fund, CSO Partners. An alliance of securities law firms is representing institutional investors harmed by the subprime crisis and the collapse of mortgage backed securities.
Citigroup's Falcon, ASTA and MAT Hedge Funds
The decline of Citigroup's fixed income hedge funds has led to investor claims and an investigation of Citigroup, Inc. (NYSE: C) according to a four-law firm legal team with nationally recognized securities law experience.
Subprime Investments
Recent turmoil in the credit markets has begun to expose the lack of disclosure and in some cases misleading sales presentations made by brokerage firms to their customer regarding the sale of Mortgage Backed Securities (MBS) or Asset Backed Securities (ABS).
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