Wall Street Investment Fraud Lawyer Blog

The Financial Industry Regulatory Authority (FINRA) has issued a warning to those who have or may concentrate too much of their retirement savings in their employer's stock. FINRA wants investors to realize that should their company's stock fall in value so will their portfolio. The greater percentage that you have invested in your company's stock, or any one company's for that matter, the more you are at risk.

There is not a restriction on the amount of 401K assets that can be held in a company's stock. This is unlike the Employee Retirement Income Security Act of 1974 (ERISA), which restricts pension plans from investing more that 10% in a company's stock. However, FINRA warns that despite your ability to invest it all in your employer's stock you should diversify and lessen your portfolio's dependency on just one company's stock.

A study, which was performed by the Employee Benefits Research Institute and the Investment Company, found "that almost 54% of employees who have the opportunity to invest in their company's stock do so." According to this same study, of employees in there sixties almost 19% have more than fifty percent of their 401K invested in their company's stock. Further, 11% have more than 90% invested in their company.

It must be remembered that a non-diversified portfolio that relies to a significant extent on the performance of one stock can be dangerous. Remember Enron? When your portfolio rises and falls with a singular company, all can be lost in one moment. Many individuals look at investment in their company as a showing of loyalty. However, when a company fails it is not likely that the company will return the favor and loyally assist their employees in recovering their 401K losses.

It is said by financial experts that an "adequately diversified portfolio" should not have more than 10%-20% of the investments in company stock. However, of course, this number may fluctuate depending on your circumstances; therefore, you should always consult a professional for advice on how best to diversify your portfolio. FINRA recommends spreading your risk so that you protect the value of your portfolio when a single stock or market sector experiences a loss.

Additionally, individuals should keep in mind that stock purchases with your employer may come with restrictions. Often employer-matched stock has restrictions. For example, the employee who purchases such stock may have to hold on to the stock until they reach a particular age or until a specific date. This may increase your risk as well. You may not be able to sell a particular stock when you wish and may suffer significant losses as a result.

Remember that all companies will experience gains and losses. Therefore, you should not put all your eggs in one basket, even with the company that pays your salary. Diversify!

Andre Martin, a special agent in charge of the Internal Revenue Service- Criminal Investigation Washington Field Office which covers the virginia, Maryland and Washington D.C. area, has published, in The Tidewater News, some wise words of caution to all regarding tax scams and schemes that we should beware of. Martin offers this advice in hopes that he can shield invididuals from the "emotional pain and financial devastation inflicted upon victims of tax and other financial crimes."

First, Martin reminds us that these types of schemes can cost an individual their life savings. Furthermore, Martin wants people to understand that if you knowingly participate in a tax scheme you could be prosecuted and potentially imprisoned for your actions.

Martin warns us of the following more prominent tax scams or investment schemes:

1) Tax Scams: Some fraudsters will try and convince you that you are not legally required to file an income tax return or pay federal income taxes. This is not true. Federall income tax laws have consistently been upheld in court and do require filing and payment of income taxes. Every year, 1000 inviduals are prosecuted for evading payment of income taxes, willfully failing to file tax returns, falsifyling tax returns to gain inflated tax refunds and other similar tax crimes.

2) Invesment Fraud: Investment fraud can financially destroy an individual. If someone promises extraordinary rates of return, make sure to check on these promises by having a legal, tax or investment professional review the investment. Martin reminds us that things that are too good to be true often are. Avoid handing over your savings to fraudsters who will definately enjoy YOUR money.

3) Money laundering schemes; Money laundering is "the conversion of illegal or 'dirty' money funds or assets that appear to have come from legitimate sources." So-called dirty money must be cleaned in order for the criminal to use it. To accomplish the laundering the criminal may run the dirty money through a legitimate business. Dirty money may be as a result of drug sales, fraud, embezzlement, or other illegal sources. Do not agree to launder money for anyone regardless of the promises of the wrongdoer?

4) Mortgage fraud: This typically involves false representations made to a lender to obtain a mortgage that the lender would not approve normally. Mortgage fraud can be performed by sellers, appraisers, agents, loan officers, and/or buyers. Marin reminds us to not jeopardize your good name by becoming involved in such a scheme. You can ruin your credit and possibly be prosecuted and imprisoned for such actions.

Finally, Martin asks us to be diligent in "protecting the integrity of our personal financial affairs."

Do you believe that you have fallen victim to any of the above schemes? Our firm will provide you with a free consultation to discuss potential claims you may have. For additional information on investment schemes or our firm, please visit www.dossfirm.com.

According to a Securities and Exchange Commission (SEC) press release, the SEC and the Alabama Securities Commission (ASC) have charged Aura Financial Services, Inc. (Aura), a Birmingham, Alabama based broker-dealer, with churning of custormer accounts, "widespread supervisory failures" and other securities violations. The SEC and ASC believe that the actions of Aura, including several senior officers and registered representatives, caused signifcant harm to clients, while significantly enriching the profits of the firm.

Specifically, the SEC alleges that several of Aura's registered representatives used "fraudulent practices and high-pressure sales tactics to convince customers to open and invest money in Aura brokerage accounts, which the brokers subsequently churned." Churning is where a broker excessively trades a customers' account to generate commissions for the broker, disregarding the investment objectives of the customer. It is said by the SEC that Aura made approximately $1 million in commissions and other fees as a result of their fraudulent practices. Unfortunately, Aura profited while many of the customer's accounts were depleted as a result of trading losses and excessive transaction costs. It is believed by the SEC that this scheme began in 2005 and continued until at least April of 2009.

The ASC alleges that Aura and three managers failed to adequately supervise their brokers and violated compliance responsibilities outlined by Alabama securities laws. The ASC believes that Aura and these managers "failed to adopt appropriate procedures, failed to enforce rules, failed to conduct branch office inspections, and failed to maintain files of and follow up on consumer complaints." These responsibilities were even more critical since many of the firm's representatives allegedly had criminal or disciplinary backgrounds and many prior customer complaints.

Katherine Addleman, Director of the SEC's Atlanta Regional Office says that Aura and six brokers "bought and sold securities in these accounts solely to generate commissions for themselves, with a total disregard for their customers' investment goals." Director of the ASC, Joseph P. Borg, is proud of the collaborative effort of the ASC and SEC in stoping investor harm and discipling those who engage in or allow fraud to occur.

Aura is required by the ASC, within 28 days, to show cause to the ASC why its registration as a broker dealer and agent in Alabama should not be revoked or suspended.

The SEC seeks preliminary injunctions against 4 of the 6 brokers associated with Aura and has requested expedited discovery period and a hearing within 30 days. The SEC also seeks court orders which permanently prohibit all of the defendants from violating the antifraud provisions of the federal securities laws in the future and seeks to have the defendants disgorge their ill-gotten gains and pay fines.

If you believe that you may be a victim of investment fraud, our firm may be able to help. Please do not hesitate to contact our office. For further information, you may visit our website www.dossfirm.com.

According to newsday.com, many Ponzi Scheme victims will now be able to write off their financial losses under their state itemized tax deductions.  New York will allow victims to claim such loses as a "theft" deduction.  New York State is merely following the Internal Revenue Service's (IRS) lead.  In March, the IRS issued a statement saying that investors can claim their financial losses as theft. This allows the investor higher deductions than capital, personal theft and personal casualty loss.

New York state officials have also stated that individuals who have already filed their 2008 state tax returns can amend their returns.

However, individuals should know that New York tax laws do limit how much can be written off. According to newsday.com, "itemized deductions are reduced by up to 25 percent for individuals who make more than $100,000 in adjusted gross income, and for married taxpayers with more than $200,000 in adjusted gross income. Further, "it's reduced by up to 50 percent for all filers making more than $475,000 in adjusted gross income," says Ellen Yan of newsday.com. However, those with an adjusted gross income of more than $1 million will not be able to make non-charitable itemized deductions, which includes theft deductions.

This should come as some relief for investors who have lost money as a result of a ponzi scheme. Most notably in New York this shall aid those who are victims of the Bernie Madoff investment scam.  

In addition to tax relief, victims of investment fraud may have legal claims which could provide further financial relief and/or recovery. If you believe that you are a victim of investment fraud, please do not hesitate to contact our firm.  We provide free legal consultations. Additionally, please visit our website www.dossfirm.com for further information with regard to investment fraud.

According to Richard Burnett of the Orlando Sentinel, investment fraud is on the rise in Florida. Regulators in Florida say that the number of complaints in Florida about suspicious investment activity has more than doubled. Last year alone regulators at the state Office of Financial Regulation has received 425 complaints.  So, far this year regulators have received 112 complaints. 

The U.S. Securities and Exchange Commission has began investigating 300 complaints of suspected fraud this year, which is a 32 percent increase from last year. Further, the SEC has issued 30 emergency orders freezing the assets of suspected fraudsters so far this year. Last year the SEC issued only 7 as of this time period last year.

We are reminded that for every high profile matter, like the Bernie Madoff ponzi scheme, there are hundreds of smaller investment schemes. There are schemes where individuals lose thousands of dollars and schemes where individuals lose hundreds of thousands of dollars.

Additionally, we must also remember that these scams take place in many different places and in many different venues.  Each state has their own regulators tracking down fraudsters, which can be found ANYWHERE, including churches, social groups, boy scout/girl scout troups, and even in fancy investment firm offices.

Investment schemes prey on all types of investors. Unfortunately, fraudsters are taking advantage of the economic climate, promising big returns, to snag victims.  However, all is not lost. Investment fraud victims may be able to recover some of their losses.  If you believe that you are a victim of investment fraud, we invite you to contact our office for a free consultation. If you would like further information about investment fraud, please visit our website at www.dossfirm.com