Today, the State of Massachusetts issued a subpoena to Bank of America concerning its involvement in Lyon Capital and Byrn Mawr that resulted in $150 million in losses to investors. According to William Galvin, the Secretary of Massachusetts, “My securities division is investigating these CLOs to determine if the issuer was knowingly over-valuing the assets in the portfolio to get them off their books and onto investors. What did the issuers know at the time of the sales and were the assets being priced truthfully?”

Earlier this month, a Financial Industry Regulatory Authority (“FINRA”) Arbitration Panel Awarded a Lyon Capital CLO investor $1.38 million which represents the entirety of the investment lost by the Claimant, attorney’s fees, interest and hearing session fees. According to the Claimant in that case, Lyon Capital CLO was sold as low risk investment. However, the Claimant alleged, unbeknownst to him, while Banc of America was packaging the Lyon Capital deal, the loans which had been purchased in previous months were already losing value. Consequently, the Claimant purchased what he contended to be artificially inflated assets that were intrinsically worthless on the day the deal closed.

Investors who purchased Lyon Capital or Bryn Mawr CLO from Banc of America can contact K&T to explore their legal rights and options. The attorneys at K&T are dedicated to pursuing claims on behalf of investors who have suffered significant investment losses. K&T, an experienced, qualified and nationally recognized securities litigation law firm, practices exclusively in the field of securities arbitration and litigation.

The findings stated that the customers were retirees with conservative investment objectives living on fixed incomes who suffered collective losses of approximately $390,000 during the period of excessive trading. The findings also stated that Byerly recommended and effected the transactions without having reasonable grounds for believing that such transactions were suitable for the customers in view of the size and frequency of the transactions, the transaction costs incurred, and in light of the customers’ financial situations, investment objectives and needs. The findings also included that Byerly exercised discretion in these accounts as well as in other customers’ accounts without the customers’ written authorization or his member firm’s written acceptance of the accounts as discretionary; his firm did not permit discretionary accounts.

FINRA found that Byerly continuously misrepresented to his firm on annual compliance questionnaires over a three-year period that he did not maintain any accounts in which he had exercised discretion. FINRA also found that in response to a written FINRA request seeking information regarding a customer complaint, Byerly submitted a letter to FINRA in which he falsely misrepresented that he had received the customer’s prior approval for all trades in the customer’s account.

FINRA also found that Hockensmith completed and executed his firm’s representative affirmations addressing the firm’s policies and procedures regarding selling away/private securities transactions, and the firm addressed the topic at multiple annual compliance meetings, as well as issuing compliance bulletins/notices to its representatives regarding selling away/private securities transactions.FINRA found that Hockensmith borrowed $200,000 from a client without his firm’s knowledge or consent and contrary to the firm’s written procedures prohibiting representatives from borrowing from a customer. FINRA also found that Hockensmith executed representative affirmations agreeing to his firm’s procedures manual regarding prohibited activities, which included borrowing from customers. In addition, FINRA determined that Hockensmith failed to respond to FINRA Rule 8210 requests for information.

The Claimants in these cases alleged that Phil Scott made unsuitable recommendations to place their assets in the Merrill Lynch Phil Scott Team Income Portfolios which were invested in 100% equities. To make matters worse, one of the Claimants had 60% of the portfolio pledged to three different Merrill Lynch loans. This only increased the risk associated with their portfolio and led to the forced liquidation of securities when the market value of the account declined. It appears that Phil Scott employed the exact same or similar investment strategy in the accounts of most if not all of his customers’ accounts, resulting in significant losses.

Investors who held accounts with the Phil Scott Team and Merrill Lynch and sustained substantial losses can contact K&T to explore their legal rights and options.  You may be able to recover your losses by filing an individual arbitration claim against Merrill Lynch. 

The attorneys at K&T are dedicated to pursuing claims on behalf of investors who have suffered significant investment losses. K&T, an experienced, qualified and nationally recognized securities litigation law firm, practices exclusively in the field of securities arbitration and litigation.  It continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.

On February 10, 2012, the State of Massachusetts issued a subpoena to Bank of America concerning its involvement in Lyon Capital and Byrn Mawr that resulted in $150 million in losses to investors. According to William Galvin, the Secretary of Massachusetts, “My securities division is investigating these CLOs to determine if the issuer was knowingly over-valuing the assets in the portfolio to get them off their books and onto investors. What did the issuers know at the time of the sales and were the assets being priced truthfully?”

Also in February 2012, a Financial Industry Regulatory Authority (“FINRA”) Arbitration Panel Awarded a Lyon Capital CLO investor $1.38 million which represents the entirety of the investment lost by the Claimant, attorney’s fees, interest and hearing session fees. According to the Claimant in that case, Lyon Capital CLO was sold as low risk investment. However, the Claimant alleged, unbeknownst to him, while Banc of America was packaging the Lyon Capital deal, the loans which had been purchased in previous months were already losing value. Consequently, the Claimant purchased what he contended to be artificially inflated assets that were intrinsically worthless on the day the deal closed.

Investors who purchased Lyon Capital or Bryn Mawr CLO from Banc of America can contact K&T to explore their legal rights and options to attempt to recover their investment losses.

According to Beckman’s Financial Industry Regulatory Authority (“FINRA”) BrokerCheck Report, he was registered with NRP Financial from November 2005 to March 2008, and then Western International from March 2008 to May 2009. Many of Beckman’s clients who invested in the Currency Program were clients of Oxford PCG, the branch of NRP Financial that was owned in part by Beckman. The BrokerCheck Report also discloses that Beckman is currently the subject of three pending FINRA Arbitration Complaints involving the Currency Program. The three claims seek total damages of about $11.2 million.

Investors who held accounts with Jason Bo-Alan Beckman and Oxford PCG, Western International or NRP Financial can contact Klayman & Toskes to explore their legal rights and options.

FINRA also found that Hockensmith completed and executed his firm’s representative affirmations addressing the firm’s policies and procedures regarding selling away/private securities transactions, and the firm addressed the topic at multiple annual compliance meetings, as well as issuing compliance bulletins/notices to its representatives regarding selling away/private securities transactions.FINRA found that Hockensmith borrowed $200,000 from a client without his firm’s knowledge or consent and contrary to the firm’s written procedures prohibiting representatives from borrowing from a customer. FINRA also found that Hockensmith executed representative affirmations agreeing to his firm’s procedures manual regarding prohibited activities, which included borrowing from customers. In addition, FINRA determined that Hockensmith failed to respond to FINRA Rule 8210 requests for information.

The Financial Industry Regulatory Authority (“FINRA”) is examining sales of certificates of deposit tied to derivatives after banks sold a record number of the investments last year.

The industry-backed regulator wants to make sure the so- called structured CDs, where principal is protected by the Federal Deposit Insurance Corp., are properly understood by investors given their increasing complexity and lengthening maturities, said Maria Rabinovich, a lawyer in Finra’s risk division. Rabinovich, who spoke yesterday after a session on structured product law and regulation at Morrison & Foerster, LLP’s office in New York, declined to comment further.

The watchdog issued an alert on “complex products” in January, without referring to the CDs. The notice avoided defining what constitutes such products, while outlining a few examples, such as those where information is not readily available about the assets they’re tied to, and so-called “steepeners,” which typically bet on the shape of the Treasury yield curve.

Demand for derivative-linked certificates of deposit has risen as the Federal Reserve holds interest rates below 0.25 percent for the third straight year. Yields on five-year, fixed-rate CDs have declined to 1.55 percent, the lowest level since at least June 1998, according to date from Bankrate.com.

Banks sold a record 1,271 of the investments in the U.S. last year, according to StructuredRetailProducts.com, a database used by the industry. Statistics on total volume are incomplete because banks aren’t required to register issuance with the Securities and Exchange Commission, and the FDIC doesn’t track the products separately.

FINRA’s complaint charges that in October 2011, Schwab amended its customer account agreement to include a provision requiring customers to waive their rights to bring or participate in class actions against the firm. Schwab sent the amended agreements to nearly 7 million customers.

The agreement also included a provision requiring customers to agree that arbitrators in arbitration proceedings would not have the authority to consolidate more than one party’s claims. FINRA’s complaint charges that both provisions violate FINRA rules concerning language or conditions that firms may place in customer agreements.

FINRA’s complaint seeks an expedited hearing because Schwab’s conduct is ongoing, as the firm has continued to use account agreements containing these provisions in opening more than 50,000 new customer accounts since October 2011.

The issuance of a disciplinary complaint represents the initiation of a formal proceeding by FINRA in which findings in the complaint have not been made, and does not represent a decision. Under FINRA rules, a firm or individual named in a complaint can file a response and request a hearing before a FINRA disciplinary panel. Possible remedies include a fine, censure, suspension or bar from the securities industry, disgorgement of gains associated with the violations and payment of restitution.

Over the past year, two separate Financial Industry Regulatory Authority (“FINRA”) Arbitration Panels rendered Awards on behalf of customers of Phil Scott and Merrill Lynch who sought total damages of about $2.7 million. Collectively, the Panels awarded the Claimants about $2 million in compensatory damages, attorneys’ fees, costs, interest, and forum fees. The Claimants in the first case, which was decided in June of 2011 (FINRA Case No. 09-06762), were awarded about $880,000, and the Claimants in the second case, which was decided in January of this year (FINRA Case No. 10-03400), were awarded approximately $1.2 million.

The Claimants in these cases alleged that Phil Scott made unsuitable recommendations to place their assets in the Merrill Lynch Phil Scott Team Income Portfolios which were invested in 100% equities. To make matters worse, one of the Claimants had 60% of the portfolio pledged to three different Merrill Lynch loans. This only increased the risk associated with their portfolio and led to the forced liquidation of securities when the market value of the account declined.

Investors who held accounts with the Phil Scott Team and Merrill Lynch can contact K&T to explore their legal rights and options.