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© 2021 Business Trial Group

515 North Flagler Drive., Suite 2125, West Palm Beach, Florida 33401

Category: Investor Alerts

FINRA’s New Rule Limits Brokers From Being Named as Customers’ Beneficiaries

Investor Alerts Attorney Jared Levy November 16, 2020
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FINRA recently adopted a new rule to limit stockbrokers from being named a beneficiary, trustee, or executor by a customer.  The new FINRA Rule 3241 protects investors by requiring all FINRA-member brokerage firms to affirmatively address any situation where a customer appoints a firm’s stockbroker as beneficiary or to another position of trust such as a trustee or executor.  Rule 3241 requires the brokerage firm to affirmatively permit or prohibit the stockbroker from acting in such capacity or receiving a bequest from a customer’s estate.  The Rule takes effect on February 15, 2021.

FINRA has explained that it adopted the new Rule because investment professionals face potential conflicts of interest when they act in positions of trust for a customer.  The conflicts can include a financial advisor benefiting from his or her influence over significant monetary decisions, which may harm the customer.  FINRA also found that senior investors – including those suffering from mental impairments such as dementia – are particularly vulnerable when they appoint their advisor to a position of trust.

Under the new Rule, the brokerage firm must assess the risks created by a customer’s appointment of a registered person to a position of trust.  Some of the risks include: potential conflicts of interest; the customer’s age; the size of any bequest as compared to the size of the customer’s estate; whether the stockbroker has been named as a beneficiary to other customers; and any indications of customer vulnerability or undue influence.

Although Rule 3241 does not prohibit a stockbroker from being named a customer’s beneficiary or receiving a bequest from a customer’s estate, brokerage firms will be required to carefully determine whether to allow it.  Brokerage firms that affirmatively approve of such a relationship must reasonably decide that it does not present a risk of financial exploitation.

If you want to read the new Rule 3241, it can be found here.

At Morgan & Morgan, we are committed to fighting for justice against brokerage firms and investment advisory firms that exploit their customers.  We commend FINRA for passing the new Rule 3241, which hopefully will help protect customers from being taken advantage of by their financial advisors and stockbrokers.

The Business Trial Group at Morgan & Morgan helps investors recover their losses on a contingency basis. We are only paid if we successfully recover money for you.  We have helped investors recover tens of millions of dollars of investment losses.

The Business Trial Group is part of the largest contingency law firm in the nation, with over 700 lawyers and offices nationwide. Contact us at 888-251-2668 today to speak with an experienced securities attorney.

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Recovery of Investment Losses in Bond Funds Reporting Inflated Returns

Investor Alerts Emily Zulz November 6, 2020
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Morgan & Morgan’s Business Trial Group and its securities attorneys are investigating bond funds that allegedly reported inflated returns to attract investments and win high ratings from Morningstar.

According to a recent paper published by several professors, Vladimir Atanasov and John Merrick (of William & Mary) and Philipp Schuster (of the University of Stuttgart), many start-up bond funds invest in bond securities (like mortgage-backed securities) in small “odd lots,” or increments of less than $1 million.  Odd lots frequently trade at a discount to larger, “round lot” positions.  But some bond funds allegedly do not always apply those discounts when they mark the value of these odd-lot bonds.  Instead, they allegedly mark the bonds at the higher round-lot price.  Using those higher marks may falsely inflate the fund’s overall return because the bond bought at a discount suddenly is worth its full price.

The professors shared their preliminary findings with the SEC in 2016, using Semper Capital Management LP’s MBS Total Return fund as an example of this practice.  Semper launched the fund in 2013.   According to the professors, by the end of the fund’s first three months, odd lots accounted for nearly three-quarters of its portfolio.

The SEC subsequently brought claims against Semper, alleging that Semper marked its discounted odd lots at the higher round-lot prices, which inflated the fund’s performance.  According to the SEC, Semper failed to tell investors enough about the reasons for its impressive start.  Semper and the SEC settled earlier this year, with Semper paying $500,000.

The professors have identified a dozen bond funds managing a combined $75 billion, all of which have launched since 2010, purchased large quantities of odd lots, and reported returns substantially greater than their benchmarks.  Among them allegedly are the following funds: AlphaCentric Income Opportunities; Semper MBS Total Return; Deer Park Total Return Credit Fund; and the Performance True Strategic Bond Fund.

If you have suffered investment losses in any of these funds, or any other bond funds that were launched during the last decade, you may have a legal claim.  The securities attorneys at Morgan & Morgan’s Business Trial Group are here to help. Please contact us a 888-874-9075 for a free consultation.

The Business Trial Group at Morgan & Morgan helps investors recover their losses on a contingency basis.  We are only paid if we successfully recover money for you.  We have helped investors recover tens of millions of dollars of investment losses.

The Business Trial Group is part of the largest contingency law firm in the nation, with over 700 lawyers and offices across the country.

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SEC Awards $114 Million Whistleblower Award

Investor Alerts Attorney Jared Levy October 27, 2020
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The SEC recently announced a $114 million whistleblower award to a person who provided information that resulted in a successful enforcement action. The $114 million award is a record for the whistleblower program by a long shot – it is more than double the next highest award of $50 million made in June 2020.

SEC Chairman Jay Clayton stated:  “Today’s milestone award is a testament to the Commission’s commitment to award whistleblowers who provide the agency with high-quality information. Whistleblowers make important contributions to the enforcement of securities laws and we are committed to getting more money to whistleblowers as quickly and as efficiently as possible.”

Jane Norberg, Chief of the SEC’s Office of the Whistleblower, said: “The actions of the whistleblower awarded today were extraordinary.  After repeatedly reporting concerns internally, and despite personal and professional hardships, the whistleblower alerted the SEC and the other agency of the wrongdoing and provided substantial, ongoing assistance that proved critical to the success of the actions.”

When a whistleblower voluntarily gives the SEC original, timely, and credible information that results in a successful enforcement action, he or she may receive an award under the SEC’s whistleblower program.  Whistleblower awards range from 10 to 30 percent of the sanctions collected from the securities violator.

The SEC has awarded over $675 million to 108 people since announcing its first award in 2012.  These awards are paid from an investor protection fund that is funded solely by penalties and fines that securities laws violators pay to the SEC.

We are here to help tipsters with the whistleblower process. Please contact one of our Business Trial Group attorneys at 888-874-9075 or online if you have information of securities-related fraud that you believe the SEC (or other agencies, like the CFTC) may be interested in prosecuting.

The Business Trial Group is part of the largest contingency law firm in the nation, with more than 700 lawyers and offices nationwide.  We regularly battle against brokerage firms, investment advisory firms, and banks, and have helped investors recover tens of millions of dollars of investment losses.

The Business Trial Group at Morgan & Morgan will never charge hourly fees or expensive retainers.  We are only paid if we successfully recover money for you.

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Business Trial Group Investigates SAExploration Holdings’ Alleged Accounting Fraud

Investor Alerts Attorney Jared Levy October 22, 2020
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Morgan & Morgan’s Business Trial Group and its securities attorneys are investigating an alleged accounting fraud involving Houston-based seismic data company, SAExploration Holdings Inc. (SAE).

The SEC recently charged SAE and several former executives with perpetrating an accounting fraud that inflated SAE’s revenue by about $100 million. The SEC also alleges that the executives stole millions of dollars.

The SEC asserts that beginning in 2015, the four SAE executives – former CEO and Chairman Jeffrey Hastings, former CFO and General Counsel Brent Whiteley, former CEO and COO Brian Beatty, and former VP of Operations Michael Scott – caused SAE to enter into several seismic-data acquisition contracts totaling about $140 million with a purportedly unrelated Alaska company.  According to the SEC, Hastings and Whiteley actually controlled the Alaska company. The SEC alleges that about $100 million of the $140 million contract was improperly recorded as revenue, as the Alaskan company allegedly had no ability to pay.  The SEC claims that the executives made it appear that the Alaskan company was paying SAE for seismic data, when no bona fide payments were made.   The SEC further alleges that the executives also stole about $6 million.  Finally, the SEC alleges that one of the executives misappropriated an additional $4 million through a fraudulent invoice scheme.

SAE issued restated financial statements earlier this year and then declared bankruptcy in August.

The SEC’s complaint charges SAE and the four executives with violating various provisions of the Securities Act of 1933, as well as the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. The SEC seeks a permanent injunction against SAE and permanent injunctions, civil penalties, disgorgement, and officer-and-director bars against the four executives.

If you have suffered losses relating to SAE’s alleged accounting fraud, the securities attorneys with Morgan & Morgan’s Business Trial Group are here to help.  Please contact us at 888-874-9075 for a free consultation.

The Business Trial Group at Morgan & Morgan helps investors recover their losses on a contingency basis.  We are only paid if we successfully recover money for you.  We have helped investors recover tens of millions of dollars of investment losses.

The Business Trial Group is part of the largest contingency law firm in the nation, with over 700 lawyers and offices nationwide.

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