Wall Street Investment Fraud Lawyer Blog

The Doss Firm, LLC is currently investigating whether Ameriprise Financial f/k/a H&R Block Financial Advisors violated industry rules on a wide-spread basis in connection with the unsuitable sale of reverse convertible notes to senior citizens.

FINRA fined the firm as well as Andrew MacGill, a broker with the firm, this week for making unsuitable sales of reverse convertible notes to a senior couple. Andrew MacGill practices out of Tampa, Florida. The Doss Firm, LLC has been retained by other Ameriprise clients who are complaining they too were sold reverse convertible notes.

Reverse convertible notes are inherently very risky investments. Unfortunately, in many instances they were sold as safe income-producing alternative investments, which is why FINRA has taken action against H&R Block Financial Advisors.

A reverse convertible note is a type of structured product. According to Notice To Members ("NTM") 05-59, structured products are securities created by investment banks that are derived from or based on a single security, a basket of securities, an index, a debt issuance, and/or foreign currency. As such, these investments come in many shapes and sizes.

Most structured products pay an interest or coupon rate substantially above the prevailing market rate. Structured products also frequently cap or limit the upside participation in the referenced asset. These unique financial instruments are typically issued by investment banks or their affiliates and have a fixed maturity date. Some structured products are listed on a national securities exchange and some are not. Because they are so unique, however, even those listed on a national exchange are thinly traded.

As a result, once an investor purchases such an investment, it is difficult to get out of it prior to the maturity date without suffering a substantial penalty. Structured products typically have two components - a note and a derivative (often an option). The note pays interest to the individual at a specified rate and interval. The derivative component or option component establishes the payment upon maturity.

Most reverse convertibles sold to consumer are linked to a single stock in a household name company (e.g. Jet Blue, Norfolk Southern, Lowes and Bristol Myers to name a few.) Prior to the maturity date, which was typically only a few months, investors receive interest payments at a rate that is higher than the prevailing market rate. Importantly, the reverse convertible notes do not allow investors to participate in any upside in the referenced underlying stock. Investors fully participate, however, in all downside market risk of that stock, because upon maturity (i.e. at the expiration of the option), if the price per share of the underlying stock falls below a predetermined value, the note converts into shares of underlying common stock at the eroded price per share. In other words, in exchange for receiving some income, investors risk losing some or all of their principal investment by assuming all of the downside risk of the underlying stock and by giving up all of the upside potential.

If you believe you have been sold unsuitable reverse convertible notes and suffered losses, you may have a claim to recover damages. Please contact The Doss Firm, LLC at 770-578-1314.

FINRA, Financial Industry Regulatory Authority announced that it was fining H&R Block Financial Advisors, Inc. (n/k/a Ameriprise Advisor Services, Inc.) $200,000 for failing to establish adequate supervisory procedures in connection with the sale of reverse convertible notes. FINRA also fined Andrew MacGill, an advisor of the firm for making unsuitable recommendations to a retired couple.

FINRA also released an Investor Alert, Reverse Convertibles - Complex Investment Vehicles, to educate consumers about these complex structured products. FINRA also issued Regulatory Notice 10-09, reminding firms of their sales practice obligations when recommending or selling reverse convertible notes.

A reverse convertible note is a type of structured product. According to Notice To Members ("NTM") 05-59, structured products are securities created by investment banks that are derived from or based on a single security, a basket of securities, an index, a debt issuance, and/or foreign currency. As such, these investments come in many shapes and sizes.

Most structured products pay an interest or coupon rate substantially above the prevailing market rate. Structured products also frequently cap or limit the upside participation in the referenced asset. These unique financial instruments are typically issued by investment banks or their affiliates and have a fixed maturity date. Some structured products are listed on a national securities exchange and some are not. Because they are so unique, however, even those listed on a national exchange are thinly traded.

As a result, once an investor purchases such an investment, it is difficult to get out of it prior to the maturity date without suffering a substantial penalty. Structured products typically have two components - a note and a derivative (often an option). The note pays interest to the individual at a specified rate and interval. The derivative component or option component establishes the payment upon maturity.

Most reverse convertibles sold to consumer are linked to a single stock in a household name company (e.g. Jet Blue, Norfolk Southern, Lowes and Bristol Myers to name a few.) Prior to the maturity date, which was typically only a few months, investors receive interest payments at a rate that is higher than the prevailing market rate. Importantly, the reverse convertible notes do not allow investors to participate in any upside in the referenced underlying stock. Investors fully participate, however, in all downside market risk of that stock, because upon maturity (i.e. at the expiration of the option), if the price per share of the underlying stock falls below a predetermined value, the note converts into shares of underlying common stock at the eroded price per share. In other words, in exchange for receiving some income, investors risk losing some or all of their principal investment by assuming all of the downside risk of the underlying stock and by giving up all of the upside potential.

These are inherently very risky investments. Unfortunately, in many instances they were sold as safe income-producing alternative investments, which is why FINRA has taken action.

If you were sold reverse convertible notes and lost money you may legal rights to recover your losses. Please call The Doss Firm, LLC for a free consultation.

With all of the talk these days about the need to find alternative energy sources, there is a real demand for "Green" energy. There are a lot of legitimate entrepreneurs out there looking for investors to put up money to fund new energy-saving environmentally-friendly ideas. With every legitimate entrepreneur however, comes a hundred scam artists also looking to make a buck from unsuspecting potential victims.

On December 29, 2009, FINRA, the organization tasked with regulating the financial services industry, issues an Investor Alert entitled, Save Your Greenbanks - Don't Fall for Green Energy Scams. The Investor Alert provides a great discussion on ways to avoid becoming a victim of these scams.

Some tips include:
1. Beware of investment opportunities promises high returns;
2. Beware of unsolicited recommendations communicated through methods such as faxes, emails, text messages, etc.;
3. Don't invest in things you do not understand.

The most unfortunate part of these scams is that when something goes wrong, there is rarely a chance to recover the losses from the fraudster because they are almost always insolvent. As a result, the best approach is to stay away altogether.

According to WRAL.com, AARP along with the North Carolina Secretary of State Elaine Marsall and Financial Industrial Regulator Authority Foundation President John Gannon are joining forces in an effort to protect elderly investors from investment fraud. They have begun a statewide campaign to educate investors and assist them in avoiding investment scams.

This type of education is critical and it is hoped that this campaign will provide investors with the tools to determine whether they are being marketed a fraudulent investment. Each day individuals, both young and old, fall victim to investment schemes. No one is safe and all investments should be screened with the same intensity.

If you would like more information on investment fraud, please go to our website at www.dossfirm.com. If you feel as though you may be a victim of an investment scheme, do not hesitate to contact our office to discuss your legal rights. An initial consultation with one of our lawyers is free. Remember time is of the essence when you are considering a legal remedy.

Due to the long overdue need for investor-friendly reform in the financial services industry, the Obama administration has proposed legislation that would require broker-dealers who provide investment advice to assume fidicuary duties to their clients. In case you do not know, a fiduciary is someone that is held in a position of trust. As a result of this trust relationship, the person acting as a fiduciary owes his or her client a higher duty of care. This makes common sense in the brokerage industry given that investors who hire financial advisors typically rely on their expertise to make sound investment decisions.

A recent Investment News article entitled, Insurance-affiliated brokers face major changes under Obama plan, highlighted a glaring problem in the financial services industry, particularly regarding brokers whose firms are affiliated with life insurance companies. The article stated that if the Obama plan is passed, "broker defections, a loss of market share and spin-offs could be on the horizon." According to the article, the reason for this anticipated consequence is that brokers who are affiliated with life insurance companies have an inherent conflict of interest with their clients because they are often incentivized to sell investments and life insurance products (eg. annuities) that are issued by the affiliated life insurance company.

In my opinion, this is reason enough to stay away from brokers who work for insurance companies. Based on my own experience representing aggrieved investors in lawsuits against brokerage firms, a disproportionate percentage of my clients who are customers of these brokers ultimately are sold variable annuities in their portfolios. These products are rarely appropriate for investors, particularly retirees who are withdrawing living expenses from the annuities. This article only confirms my distaste of mixing investments with insurance products.

For more information about common investor claims brought against brokerage firms, please visit our Investor Resource Center. In addition, for more information about our law firm, please click here.

According to the most recent Atlanta Business Chronicle article entitled Atlanta companies lose billions in retirement funds, some of the largest Atlanta/Georgia-based companies have lost billions of dollars in their retirement and savings plans. The losses approximate $2.7 billion in 2008. The companies are listed below along with their respective 2008 decline in employee investable assets:

Southern Company - $489 million
Coca Cola - $456 million
Coca Cola Enterprises - $449 million
The Home Depot - $384 million
Mohawk Industries - $137 million
UPS - $118 million
Invesco- $104 million
Equifax - $88 million
AGL Resources - $59 million
Zep, Inc. - $59 million
Aflac - $53 million
Georgia Gulf - $48 million
Acuity Brands - $47 million
Beazer Homes - $36 million
Sprectrum Brands - $35 million
Interface - $25 million
Gray Television - $19 million
S1 Corp. - $15 million
Premiere Global Services - $12 million
Rollins - $32 million
United Community Banks - $9.6 million
Post Properties - $9 million
Aaron's Inc. - $4.1 million
Lodgian - $3.9 million
Fidelity Southern - $3.8 million
Habersham Bancorp - $2.3 million
Heritage Financial - $431,000

According to the Atlanta Business Chronicle article, the vast majority of these losses occurred in employee contribution plans, like 401(k) plans. In these types of accounts, employees decide where to invest the funds. However, the employer typically provides the investment options to the employees. For example, an employer could offer company stock to employees in a 401(k) plan. It is not clear from the article whether any of the companies above do in fact offer company stock as an option.

If a company does, however, offer company stock as an option, it may be opening itself up to lawsuits by participants in the 401(k) plan. Courts have held that companies can be held liable under federal law (ERISA) for what amounts to a breach of fiduciary duty for unlawfully encouraging employees to invest their retirement funds in corporate stock. "Encouragment" is loosely defined. Some argue that even offering company stock inside 401(k) plans constitutes encouragement and as a result a breach of fiduciary duty because employees commonly feel obligated to invest in that option out of loyalty to the company.

For more information about common claims brought by investors, visit our Investor Resource Center. For more information about our law firm, please click here.

As investment values dropped due to the recent market downturn, investor lawsuits against financial advisers and their firms have been on the rise. According to today's Wall Street Journal article entitled New and Improved Arbitration?, investor claims are up 110% this year through May compared to the same period in 2008.

The main complaint is that "firms sold funds with more risk in them then they were told." This trend started in 2008 when the subprime crisis began and it has continued into 2009. According to the article, some of the more common claims brought by investors involve losses in bond funds issued by Regions Bank (RMK funds), Oppenheimer Funds (Oppenheimer's Champion Income Fund) and Charles Schwab (Yield Plus funds). These types of claims are generally referred to as suitability claims.

Many investors do not know that when they open an account with brokerage firms, they sign an agreement that contains a pre-dispute arbitration clause. These clauses force investors to resolve their disputes in arbitration, which is outside of the court system. For years, investor advocates have claimed that the securities arbitration system is fundamentally biased against the investor. For example, statistics provided by FINRA, the organization that facilitates the arbitration forum for securities claim, show that from January to May of 2008, investors prevailed only 42% of the time. In addition, of those investors who prevailed, they typically only receive a portion of their requested damages.

These poor results caught the attention of the Obama adminstration, which recently proposed legislation that would give the SEC the authority to examine whether mandatory arbitration harms investors.

According to today's Wall Street Journal article, FINRA recently implemented a rule and pilot program that allow more investors to have their case heard by arbitrators who are not affiliated with the securities industry. It may be pure coincidence but investor claims that prevail are up from 42% to 47% through May of this year.

For more information about typical claims brought in securities arbitration, visit our Investor Resource Center. For more information about our firm, please click here.

The Financial Industry Regulatory Authority (FINRA) offers some sound advice when it comes to Promissory Notes. Promissory notes often appear as an attractive alternative to stocks and bonds during this tough economic climate. However, investors need to beware of several problems prior to investing.

A promissory note is a type of debt that a company uses to raise capital. The company, by issuance of the note, promises to return the principal and pay fixed interest payments to the investor for the "loan." These notes have set terms, which may range from a few months to many years. It is imperative that an investor understand that promissory notes do have risks. Companies issuing the notes could run into problems, such as severe market conditions, bad management, competition, and other issues which may hinder the companies' ability to pay on the notes. There are legitimate promissory note programs. However, these are "almost exclusively (marketed) to corporate and other sophisticated investors, who have the expertise and information to determine if the investment is a good one."

FINRA warns that investors should beware of promissory note schemes. There are promissory note programs which are deceptively marketed. Investors should be aware that returns are never guaranteed. Often, promissory note schemes guarantee extremely high returns, typically returns greater than 10%. FINRA warns that the "higher the return, the greater the risk."

Additionally, promissory notes are normally securities and as such must be registered with the SEC or the State in which they are sold. If the promissory note is unregistered, then it will not be subject to review by regulators before it is sold. This will leave the investigation of the promissory note up to the investor.

Finally, investors should be aware that individuals selling promissory notes are sometimes unregistered sellers and do not have the required securities sales license. FINRA offers a BrokerCheck service, which allows you to see if your broker is registered or has a disciplinary history. You should use this service to check on your broker prior to investing with him/her.

FINRA offers the following advice when considering investing by way of promissory note:
1) Since promissory notes are marketed to sophisticated investors, ask why the seller wants to sell to you an individual investor. This may be a warning sign of a promissory note scheme.
2) Check to see whether the promissory notes are registered with the State in which they are sold and the SEC.
3) Visit FINRA's BrokerCheck to see if your broker is properly registered and to determine if they have a disciplinary history.
4) If you are using a broker, make sure they are selling with the knowledge of their firm and not "selling away." If a broker is doing this on the side and outside of the firm, you may not be protected under the firm's regulatory obligations.
5) Avoid falling for "guaranteed returns." All investments carry some sort of risk. The seller may assure you that the notes are insured, however, the insurer may not be legitimate.
6) Remember that higher returns carry a higher risk.
7) Know how the broker is getting paid. FINRA explains that commissions rarely exceed 5%. Sometimes promissory notes offer a much higher commission, sometimes as high as 30% or even 50%.
8) Learn about how the company issuing the promissory notes intends on paying the interest on the notes. Determine how the capital the company will raise will be used, whether it will be for marketing and promoter's costs.

FINRA advises investors that they should receive answers to all of the above questions. Should you not, FINRA says to walk away.

If you are already involved in a promissory note scheme, you may have legal remedies to recover money invested. Contact The Doss Firm to discuss your legal rights. Our first consultation is free. Also, if you would like further information about our firm, please visit www.dossfirm.com.

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 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

The Financial Industry Regulatory Authority (FINRA) has issued an "investor alert" warning individuals to be wary of free seminars boasting a free meal.  

Investors are frequently being invited to fancy restaurants with the promise of an expensive meal at no cost where they are given a free seminar that "educates" them about investing or managing money during retirement. The "education" becomes a sales pitch by the speaker with an ultimate goal of selling products and gaining new clients. However, investors should remember that even with the free meal there isn't and shouldn't be any requirement to purchase anything. 

 According to a survey conducted by FINRA Investor Education Foundation, four out of five investors that were 60 or older received at least one invitation to a free investment seminar in the preceding three years. Nearly 60% of these individuals actually received six or mjore of these invitations. Further, nearly 25% of these individuals attended the seminars.

If you plan on attending one of these seminars, even just for the free meal at a nice restaurant you need to head FINRA's warnings.  FINRA issued the following points to remember when attending a seminar:

1) "Seminars are designed to sell." Even though the invitation promised an educational experience, investors need to keep in mind that it is more likely that the speaker ultimately wishes to educate you about the product(s) that they are selling. During these, "hard sell" pitches, speakers may misrepresent information about their product or others and may provide misleading information as to the safety, returns, or the performance of particular products.

2) "Good shows aren't always good deals." It is easy to be taken in by a fancy meal and well-dressed, well-spoken speaker. However, don't be fooled by a lion in sheep's clothing. Why do you think that these seminars are held at pricey restaurants rather than the local fast food joint? Someone is trying to impress you to get you to come to their presentation and hear their pitch.

3) "The lead speaker might not be the actual sponsor."  The sponsor of the event may be an insurance company or mutual fund. Of course, the sponsor will want the speaker to sell their company's products over any others. This creates a potential conflict. Investments should be appropriate for the investor and their individual circumstances. Investments are not one size fits all.

4) " Education is a great idea-so be sure to learn about persuasion." It is important that an investor remember that the speaker WILL use the power of persuasion to convince investors that their product is best for you.  There are a few things that an investor should watch out for or remember during any seminar they attend. 

(a) Watch out for promises of wealth. There are no guarantees on returns.

(b) Make sure to check the sources quoted by any speaker. These speakers have a financial incentive to sell you their products. Unfortunately, this may cloud their presentation in many different ways. Check the facts.  It is always a good idea to know what you are buying, rather than soley relying on the advice of a salesperson.  

(c) Do not be convinced by individuals or statements regarding other individuals an how well they may be doing after purchasing a particular product. Do you own research on the product.

(d) Do not feel obligated to purchase anything during the seminar. You do not owe the speaker anything for the free meal. Remember they invited you at no cost.

(e) Do not let anyone create a false sense of urgency to buy a product. Often these speakers will claim there is a limited supply of a product to make a sell.

Finally, FINRA has issued the following strategies to investors in an effort to help them distinguish potentially good investment offers from bad ones.

1- "Do your homework before the seminar." "A legitimate securities salesperson must be properly licensed and his or her firm must be registered with FINRA, the Securities and Exchange Commission, or a state securities regulator - depending on the type of business the firm conducts."

2- "Ask questions while you're there." Ask all the questions you wish and do not quit until you are satisfied with the information provided. If a broker does not want to provide you with information, then you should be even more skeptical. Ask about risk, costs of the investment, fees, surrender charges, liquidity of the investment, whether the investment is registered, and the type of investors who should purchase the product?

3- "Decide now to decide later, and do more homework AFTER the event." Prior to the event, make a promise to yourself that you are not going to purchase anything or open up an account during the seminar. Based upon the information that you learn during the seminar, if you are interested then do more research on the product before you invest. It is never a good idea to buy now and then learn the hard lessons later. FINRA reminds us that there are unbiased places to find out more information about investments and these places a good place to start both prior to and after a seminar.

If you believe that you have been taken advantage of by an investment professional or firm, our firm may be able to assist you.  Please refer to our website www.dossfirm.com for more information on common investment schemes. We welcome direct contact and do offer free consultations.

The Wall Street Journal is reporting that financial advisors are turning back time and returning to the old ways of their business. As a result of economic downturn most client assets have diminished by 20%-50%, which produces a similar drop in the earnings of those advisors that are fee-based. 

Brokers are now moving their clients from fee-based accounts to a commission based fee account, in an effort to make up for fees lost in rough economic times.

Over the past several years, firms recommended fee-based accounts to their clients. In this scenario the broker would charge clients an annual fee of 1%-2% of their assets to manage the accounts, rather than charging small commissions for each trade.  The major firms would promote the fee-based model by providing brokers a higher payout where the business was fee-based.  Further, this model was touted as better for the clients because it was claimed it would prevent brokers from making unnecessary trades to make the commissions.

Interestingly, firms are now pushing the commission based accounts, which conflicts with prior recommendations, using the market conditions as a justification. Brokers are standing behind their new recommendations, arguing that they have to be able to make a living doing this and, thus, the commission based account will help them do just that.

Some brokers have dealt with the market change by including insurance products and/or other annuities that will allow them to bring in more fees.  Finally, some have resorted to the old fashioned way of making more money and that is by bringing in more clients to offset the business lost as a result of the market decline.

It is interesting that recommendations from your financial advisor can turn on how they can best make money.  Isn't it the job of the advisor to be more concerned with protecting and growing the money of the client?  Is there a conflict that arises when the broker becomes more concerned with his financial well-being? Of course, the advisor should be compensated for his/her work, but whose financial portfolio comes first, the client's or the advisor's? 

To find out more information about potential financial advisor misconduct please visit the Investor Resource Center at www.dossfirm.com.

According to today's Wall Street Journal in an article entitled Brokers Abandon Wall Street, the number of brokers leaving brokerage firms is on the rise due to slumping markets and shrinking fees.  In April alone, 2,800 brokers left the securities industry.  At this pace, 35,000 brokers will exit the industry by year end.  That would be record by a long shot.

Investors need to pay attention to this trend because it serves as a rare glimpse into the minds of financial advisors right now.  However, it is not the financial advisors who are leaving that investors need to be watching.  Investors should be paying close attention to those financial advisors who are not leaving the industry. In an environment where fees and commission are on the decline, financial advisors likely will be looking to sell higher commission products (ie. deferred annuities) to make up the difference. In addition, instances of churning will also be on the rise.  Churning is an unlawful practice where brokers make excessive trades in a client's account for the sole purpose of drumming up commissions. 

To find out more information about other common claims brought by investors, please visit our Investor Resource Center at www.dossfirm.com.

An article in today's Wall Street Journal entitled SEC Takes On Target-Date Funds, discusses the SEC's efforts to improve disclosures made in these popular investments.

What are Target-Date Funds?  

Like most mutual funds, Target-Date Funds invest in a mix stocks and fixed income investments.  What makes these mutual funds different is that the percentage of asset classes change over time as the fund approaches a target date.  For example, if you plan to retire in 20 years and live off of the income from your investments, you could invest in one of these funds with a target date of 2029. At the beginning of your investment period, the fund would be heavily weighted in stocks as opposed to the fixed income investments.  As you approached the 20 years target date, the fund would become more heavily weighted in fixed income investments.  Because of this shift over time towards a more fixed income-centric, the fund presumably becomes more conservative and income- oriented as you approach retirement. This shift in asset allocation is commonly known in the securities industry as a "glide path."

Why is the SEC scrutinizing these funds?

As with most securities related problems, it usually boils down to poor returns and poor disclosure.  According to the Wall Street Journal article, the average loss in 2008 among 31 funds with a 2010 retirement date was almost 25%.  One of the issues that the SEC is considering is whether the use of a particular target date in fund's name is misleading.  It is plausible that investors could construe a target date as some sort of guarantee about future results. 

Also, disclosures about the "glide path" methodology that a fund manager uses to shift asset allocations over time are based on assumptions that may not conform to an individual investor's real life circumstances.  These assumptions are not always adequately explained in the prospectus. As a result, the investments may not be suitable for a particular investor's financial needs.

For more helpful information about ways to avoid becoming a victim of investment abuse, visit our Investor Resource Center.

The Doss Firm, LLC is an Atlanta-based law firm devoted to protecting the rights of consumers/investors against the financial services industry. For more information about our firm, pleae visit our website at www.dossfirm.com.