Research and Credit Rating Fraud - Russell L. Forkey

Anthony Coronati and Bidtoask LLC. – Boca Raton, Florida Investment and Advertising

Russell L. Forkey — Sun, 19 Oct 2014 01:38:43 GMT

Boca Raton, Florida Investment and Advertising Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney:

SEC Charges Staten Island Man With Conducting Fraudulent Offerings and Stealing Investor Funds

The Securities and Exchange Commission trecently charged the operator of an online stock recommendation business with conducting several fraudulent securities offerings and siphoning some of the money raised from investors for a Caribbean vacation and plastic surgery.

An SEC investigation found that Anthony Coronati, who lives on Staten Island, initially held himself out as an investment adviser to a hedge fund that he claimed would invest in equity securities. But the hedge fund was fictitious and Coronati used investor money for other purposes. When the money began drying up, he went on to defraud investors in additional schemes involving his New Jersey-based company Bidtoask LLC. Coronati and Bidtoask sold membership interests in the company for the purpose of investing in promising technology companies that had yet to hold initial public offerings (IPOs). Investors were told that Bidtoask would invest directly in pre-IPO Facebook shares without charging any fees, commissions, or markups to investors. However, Bidtoask’s Facebook-related investments actually did require the payment of significant fees that Coronati and Bidtoask concealed from investors. Bidtoask did not even own the shares of other technology companies in which it was supposedly investing, and these companies were not actually in the process of an IPO.

Coronati and Bidtoask have agreed to settle the SEC’s charges. Coronati must pay back $400,000 in funds stolen from investors, and the money will be deposited into a Fair Fund for distribution to victims of the fraud schemes. Coronati also agreed to be permanently barred from the securities industry.

Coronati, who operates the website BidToAsk.com that offers stock recommendations to subscribers, was the subject of a subpoena enforcement action filed by the SEC late last yearwhen he failed to produce documents or appear for scheduled testimony during the SEC’s investigation. As a result of his continued failure to comply with SEC subpoenas in spite of a court order, Coronati was held in contempt of court and arrested earlier this year.

According to the SEC’s order instituting a settled administrative proceeding, Coronati conducted his schemes from at least 2009 to 2013. As the various schemes unraveled, he faced increasing concerns from investors. Coronati placated certain investors by making Ponzi-like payments to them using other investors’ money, and he sent a phony account statement to at least one investor purporting a position in the fake hedge fund that was worth more than $120,000. The account statement also purported that the fictitious hedge fund was more than 80 percent invested in well-known public companies such as Apple. Meanwhile, Coronati used investor funds to pay business expenses and such personal expenses as the Caribbean vacation and plastic surgery, and he also used investor money to purchase securities in a personal brokerage account he held in his own name.

The SEC’s order finds that Coronati and Bidtoask violated Section 17(a) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5. Coronati additionally violated Sections 206(1), 206(2), 206(4) of the Investment Advisers Act of 1940 and Rule 206(4)-8. Without admitting or denying the findings, Coronati and Bidtoask consented to the SEC’s order requiring them to cease and desist from further violations of those provisions of the securities laws and SEC rules. Information about the Fair Fund will be available at: www.sec.gov/litigation/fairfundlist.htm.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of elder abuse, exploitation and securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

At the Boca Raton Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Corporate and High Yield Bonds – South Florida Corporate and High Yield Bond Breach of Fiduciary Duty and Unsuitability FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Fri, 21 Mar 2014 10:57:23 GMT

Corporate and Corporate High Yield Bond Breach of Fiduciary, Unsuitability, Churining and Unauthorized Purchase and Sale FINRA Arbitration, Litigation and Probate Attorney:

If you are considering or if your account executive or investment advisor is soliciting you to purchase, hold or sell a corporate bond, you may wish to read this post to refresh your understanding of corporate bonds or, if you are an unsophisticated invesotr, arm youself with questions to ask your investment professional.

What Are Corporate Bonds?

A bond is a debt obligation, like an iou. Investors who buy corporate bonds are lending money to the company issuing the bond. In return, the company makes a legal commitment to pay interest on the principal and, in most cases, to return the principal when the bond comes due, or matures. To understand bonds, it is helpful to compare them with stocks. When you buy a share of common stock, you own equity in the company and will receive any dividends declared and paid by the company. When you buy a corporate bond, you do not own equity in the company. You will receive only the interest and principal on the bond, no matter how profitable the company becomes or how high its stock price climbs. But if the company runs into financial difficulties, it still has a legal obligation to make timely payments of interest and principal. The company has no similar obligation to pay dividends to shareholders. In a bankruptcy, bond investors have priority over shareholders in claims on the company’s assets to be distributed, if any.

Like all investments, bonds carry risks. One key risk to a bondholder is that the company may fail to make timely payments of interest or principal. If that happens, the company will default on its bonds. This “default risk” makes the creditworthiness of the company-that is, its ability to pay its debt obligations on time-an important concern to bondholders. As set forth below, this default risk has an effect on bond prices.

What are the basic types of corporate bonds?

Corporate bonds issued by listed and non-listed companies make up one of the largest components of the U.S. bond market, which is considered the largest securities market in the world. Other components include U.S. Treasury Bonds, other U.S. government bonds, and municipal bonds.

Companies use the proceeds from bond sales for a wide variety of purposes, including buying new equipment, investing in research and development, buying back their own stock, paying shareholder dividends, refinancing debt, including other bond series, and financing mergers and acquisitions. Call dates on a particular series of bonds are partially designed to assist in the refunding process.

There are a number of factors that you or your stockbroker in recommending the purchase or sale of a bond to you should take into consideration in determining whether a bond transaction is suitable for your investment objective and/or your asset mix. First, bonds can be classified according to their maturity, which is the date when the company has to pay back the principal to investors. Maturities can be short term (less than three years), medium term (four to 10 years), or long term (more than 10 years). Longer-term bonds usually offer higher interest rates, but may entail additional risks.

Second, bonds and the companies that issue them are also classified according to their credit quality. Credit rating agencies assign credit ratings based on their evaluation of the risk that the company may default on its bonds. Credit rating agencies periodically review their bond ratings and may revise them if conditions or expectations change. Based on their credit ratings, bonds can be either investment grade or non-investment grade. Investment-grade bonds are considered more likely than non-investment grade bonds to be paid on time. Non-investment grade bonds, which are also called high-yield or speculative bonds, generally offer higher interest rates to compensate investors for greater risk.

Third, bonds also differ according to the type of interest payments they offer. Many bonds pay a fixed rate of interest throughout their term. Interest payments are called coupon payments, and the interest rate is called the coupon rate. With a fixed coupon rate, the coupon payments stay the same regardless of changes in market interest rates. Other bonds offer floating rates that are reset periodically, such as every six months. These bonds adjust their interest payments to changes in market interest rates. Floating rates are based on a bond index or other bench-marks. For example, the floating rate may equal the interest rate on a certain type of Treasury Bond plus 1%. One type of bond makes no interest payments until the bond matures. These are called zero-coupon bonds, because they make no coupon payments. Instead, the bond makes a single payment at maturity that is higher than the initial purchase price. For example, an investor may pay $800 to purchase a five-year, zero-coupon bond with a face value of $1,000. The company pays no interest on the bond for the next five years, and then, at maturity, pays $1,000-equal to the purchase price of $800 plus interest, or original issue discount, of $200. Investors in zero-coupon bonds generally must pay taxes each year on a prorated share of the interest before the interest is actually paid at maturity.

What happens if a company goes into bankruptcy?

If a company defaults on its bonds and goes bankrupt, bondholders will have a claim on the company’s assets and cash flows. Consider what was just said. The bondholders will have a claim on and will not automatically receive the value of the bond. The bond’s terms determine the bond-holder’s place in line, or the priority of the claim. Priority will be based on whether the bond is, for example, a secured bond, a senior unsecured bond or a junior unsecured (or subordinated) bond. In the case of a secured bond, the company pledges specific collateral-such as property, equipment, or other assets that the company owns-as security for the bond. If the company defaults, holders of secured bonds will have a legal right to foreclose on the collateral to satisfy their claims, which collateral may or may not be sufficient to pay each bondholder in full. Bonds that have no collateral pledged to them are unsecured and may be called debentures. Debentures have a general claim on the company’s assets and cash flows. They may be classified as either senior or junior (subordinated) debentures. If the company defaults, holders of senior debentures will have a higher priority claim on the company’s assets and cash flows than holders of junior debentures. Bondholders, however, are usually not the company’s only creditors. The company may also owe money to banks, suppliers, customers, pensioners, and others, some of whom may have equal or higher claims than certain bondholders. Sorting through the competing claims of creditors is a complex process that unfolds in bankruptcy court.

What are the financial terms of a bond?

The basic financial terms of a corporate bond include its price, face value (also called par value), maturity, coupon rate, and yield to maturity. Yield to maturity is a widely used measure to compare bonds. This is the annual return on the bond if held to maturity taking into account when you bought the bond and what you paid for it.

A bond often trades at a premium or discount to its face value. This can happen when market interest rates rise or fall relative to the bond’s coupon rate. If the coupon rate is higher than market interest rates, for example, then the bond will likely trade at a premium.

What’s the relationship among bond prices, interest rates and yield?

It is important to remember that the price of a bond moves in the opposite direction than market interest rates-like opposing ends of a seesaw. When interest rates go up, the price of the bond goes down. And when interest rates go down, the bond’s price goes up. A bond’s yield also moves inversely with the bond’s price. For example, let’s say a bond offers 3% interest, and a year later market interest rates fall to 2%. The bond will still pay 3% interest, making it more valuable than newly issued bonds paying just 2% interest. If you sell the 3% bond, you will probably find that its price is higher than a year ago. Along with the rise in price, however, the yield to maturity for any new buyer of the bond will go down. Now suppose market interest rates rise from 3% to 4%. If you sell the 3% bond, it will be competing with new bonds that offer 4% interest. The price of the 3% bond may be more likely to fall. The yield to maturity for any new buyer, however, will rise as the price falls. It’s important to keep in mind that despite swings in trading price with a bond investment, if you hold the bond until maturity, the bond will continue to pay the stated rate of interest as well as its face value upon maturity, subject to default risk.

What are some of the risks of corporate bonds?

Credit or default risk:

Credit or default risk is the risk that a company will fail to timely make interest or principal payments and thus default on its bonds. Credit ratings try to estimate the relative credit risk of a bond based on the company’s ability to pay. Credit rating agencies periodically review their bond ratings and may revise them if conditions or expectations change.

The corporate bond contract (called an indenture) often includes terms called covenants designed to limit credit risk. For instance, the terms may limit the amount of debt the company can take on, or may require it to maintain certain financial ratios. Violating the terms of a bond may constitute a default. The bond trustee monitors the company’s compliance with the terms of its indenture. The trustee acts on behalf of the bondholders and pursues remedies if the bond covenants are violated.

Interest rate risk:

As discussed above, the price of a bond will fall if market interest rates rise. This presents investors with interest rate risk, which is common to all bonds, even U.S. Treasury Bonds. A bond’s maturity and coupon rate generally affect its sensitivity to changes in market interest rates. The longer the bond’s maturity, the more time there is for rates to change and, as a result, affect the price of the bond. Therefore, bonds with longer maturities generally present greater interest rate risk than bonds of similar credit quality that have shorter maturities. To compensate investors for this interest rate risk, long-term bonds generally offer higher interest rates than short-term bonds of the same credit quality. If two bonds offer different coupon rates while all of their other characteristics are the same, the bond with the lower coupon rate will generally be more sensitive to changes in market interest rates. For example, imagine one bond that has a coupon rate of 2% while another bond has a coupon rate of 4%. All other features of the two bonds-when they mature, their level of credit risk, and so on-are the same. If market interest rates rise, then the price of the bond with the 2% coupon rate will fall by a greater percentage than that of the bond with the 4% coupon rate. This makes it particularly important for investors to consider interest rate risk when they purchase bonds in a low-interest rate environment.

Inflation risk:

Inflation is a general rise in the prices of goods and services, which causes a decline in purchasing power. With inflation over time, the amount of money received on the bond’s interest and principal payments will purchase fewer goods and services than before.

Liquidity risk:

Liquidity is the ability to sell an asset, such as a bond, for cash when the owner chooses. Bonds that are traded frequently and at high volumes may have stronger liquidity than bonds that trade less frequently. Liquidity risk is the risk that investors seeking to sell their bonds may not receive a price that reflects the true value of the bonds (based on the bond’s interest rate and credit- worthiness of the company). If you own a bond that is not traded on an exchange, you may have to go to a broker when you want to sell it. In addition, the bond market does not have the same pricing transparency as the equity market, as the dissemination of pricing information is more limited for corporate bonds in comparison to equity securities such as common stock.

Call risk:

The terms of some bonds give the company the right to buy back the bond before the maturity date. This is known as calling the bond, and it represents “call risk” to bondholders. For example, a bond with a maturity of 10 years may have terms allowing the company to call the bond any time after the first five years. If it calls the bond, the company will pay back the principal (and possibly an additional premium depending on when the call occurs). One reason the company may call the bond back is if market interest rates have fallen relative to the coupon rate on the bond. That same decline in market interest rates would likely make the bond more valuable to bondholders. Thus, what is financially advantageous to the company is likely to be financially disadvantageous to the bondholder. Bondholders may be unable to reinvest at a comparable interest rate for the same level of risk. Investors should check the terms of the bond for any call provisions or other terms allowing for prepayment.

How can investors reduce their risks?

Investors can reduce their overall investment risks by diversifying their assets, if they so choose. Bonds are one type of asset, along with shares of stock (or equity), cash, and other investments. Investors also can diversify the types of bonds they hold. For example, investors could buy bonds of different maturities-balancing short-term, intermediate, and long- term bonds-or diversify the mix of their bond holdings by combining corporate, treasury, or municipal bonds. Investors with a greater risk tolerance may decide to buy bonds of lower credit quality, accepting higher risks in pursuit of higher yields. More conservative investors, however, may prefer to limit their bond holdings solely to high-quality bonds, avoiding riskier or more speculative bonds. Instead of holding bonds directly, investors can invest in mutual funds or exchange-traded funds (ETFs) with a focus on bonds. Investors should base their decisions on their individual circumstances.

How do I research my bond or bond fund investment?

A prospectus is the offering document filed with the SEC by a company that issues bonds for sale to the public in a registered transaction. Among other things, the prospectus relating to a corporate bond issuance describes the terms of the bond, significant risks of investing in the offering, the financial condition of the company issuing the bond, and how the company plans to use the proceeds from the bond sale. Similarly, if you are investing in a bond-focused mutual fund or ETF, these funds also prepare prospectuses detailing important information about the fund. Investors can ask their broker-dealer for the prospectus of any bond or bond fund in which they are interested. Prospectuses also are available to the public without charge on the SEC’s Edgar website. You can also find a bond fund’s prospectus at the bond fund’s website. Additionally, if you are considering purchasing a private company bond, you should make sure that you receive the same type of information that you are entitled to receive in a registered offering.

Please keep in mind that the above information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If you have any questions concerning the contents of this post, you should consult a qualified expert.

Contact Us:

At the Fort Lauderdale Law Office of Russell L. Forkey, we represent clients throughout South and Central Florida, including Fort Lauderdale, West Palm Beach, Boca Raton, Sunrise, Plantation, Coral Springs, Deerfield Beach, Pompano Beach, Delray, Boynton Beach, Hollywood, Lake Worth, Royal Palm Beach, Manalapan, Jupiter, Gulf Stream, Wellington, Fort Pierce, Stuart, Palm City, Jupiter, Miami, Orlando, Maitland, Winter Park, Altamonte Springs, Lake Mary, Heathrow, Melbourne, Palm Bay, Cocoa Beach, Vero Beach, Daytona Beach, Deland, New Smyrna Beach, Ormand Beach, Broward County, Palm Beach County, Dade County, Orange County, Seminole County, Martin County, Brevard County, Indian River County, Volusia County and Monroe County, Florida. The law office of Russell L. Forkey also represents South American, Canadian and other foreign residents that do business with U.S. financial institutions, investment advisors, brokerage and precious metal firms.

Corporation Annual Report (10-K) – Florida Business Practice and Corporate Litigation Attorney

Russell L. Forkey — Sat, 05 Oct 2013 23:16:20 GMT

Corporate Annual Report (10-K) – Florida Business Practice and Corporate Litigation and Arbitration Attorney:

An “Annual Report” is a record of a corporation’s annual financial condition that is required to be distributed to shareholders under Securities and Exchange Commissions rules and regulations. Included in the report is a description of the company’s operations as well as its certified balance sheet and income statement. The full version of the annual report is called the 10-K. It is available from the company or or on-line at the Edgar Website of the SEC. Other reports issued by a reporting company include forms 10-Q (quarterly reports) and 8-K (material disclosures).

As an investor, these reports provide invaluable information when considering to purchase, hold or sell a security. However, please keep in mind that this information is being provided for educational purposes only. It is not designed to be complete in all material respects. Thus, it should not be relied upon as legal or investment advice. If the reader has any questions concerning this post, you should contact a qualified professional.

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With extensive courtroom, arbitration and mediation experience and an in-depth understanding of securities law, our firm provides all of our clients with the personal service they deserve. Handling cases worth $25,000 or more, we represent clients throughout Florida and across the United States, as well as for foreign individuals that invested in U.S. banks or brokerage firms. Contact us to arrange your free initial consultation.

False and Misleading Radio and Television Broker/Dealer Advertising – South Florida Direct (Alternative) Investment and Private Placement Fraud FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Sun, 01 Sep 2013 22:32:40 GMT

Solicitation of Investment Clients by Broker/Dealers and Investment Objectives Through the Use of Radio and Television Programing – South Florida False and Misleading Advertising FINRA Arbitration and Litigation Attorney

The Financial Industry Regulatory Authority, Inc. (FINRA) is a self-regulatory authority assigned the responsibility, by the Securities and Exchange Commission, to license, regulate and discipline securities broker/dealers and their employees, including account executives. In the event that FINRA elects to institute and enforcement action, firms and licensed individuals have the responsibility to reflect such action of their U-4 and/or U-5 filings, which can be viewed on the FINRA website under the broker-check section of the site or by viewing the monthly disciplinary information also provided on the FINRA site.

The monthly disciplinary information is referenced on the site generally in alphabetical order. This post relates to the following company or individuals. If the reader would like to review the entire FINRA release or the broker-check information concerning this matter, you can follow these highlighted links:

August 2013 Disciplinary and Other FINRA Actions

Broker Check: http://www.finra.org/Investors/ToolsCalculators/BrokerCheck/

Manny Aizen a/k/a Manuel Aizen (CRD #1676247, Registered Principal, Dallas, Texas), Edward Michael Milkie (CRD #871257, Registered Principal, Dallas, Texas) and Daniel Edward Levin (CRD #707280, Registered Representative, Dallas, Texas) submitted Offers of Settlement in which they were each fined $30,000. Aizen and Milkie were each suspended for association with any FINRA member in any principal capacity for six months. The fines must be paid either immediately upon their reassociation with a FINRA member firm following their suspensions, or prior to the filing of any application or request for relief from any statutuory disqualification, whichever is earlier. Without admitting or denying the allegations, Aizen, Milkie and Levin consented to the described sanctions and to the entry of findings that Levin made unwarranted and misleading statements and claims concerning investment products on radio shows, and made unbalanced statements on their member firm’s website regarding life settlements. FINRA Case No. 2009016271801. To review the entire FINRA release relative to this matter, please follow one of the above referenced links.

Over the years, mass media such as television and radio programs have been used by brokerage and/or account executives to attempt to generate new clients for themselves or interest in specific forms of product. As such, all information provided during the program must be accurate in all material respects and must not omit any information which would make the statements misleading.

In order for an account executive, to become involved in such a television or radio program, he or she must get approval from their broker/dealer to engage in such activity, who then has the responsibility to reasonably monitor the program. In order to establish guidelines relating to the approval process and its continuing supervisory responsibilities, the broker-dealer must establish and implement a reasonable written supervisory system to safeguard customer assets. If the brokerage firm fails in its duty to reasonably supervise the account executive’s activity during this activity, the firm may be liable to the client for any losses associated with such activity.

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Investment Risk and the Average Investor – Florida Investment and Securities Risk FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Tue, 14 May 2013 11:15:19 GMT

Types of Investment Risk and the Average Investor – South Florida Investment and Securities Risk FINRA Arbitration and Litigation Attorney:

Generally risk can be described as action or inaction that can lead to a loss of some sort. It can be reduced or eliminated based on the action taken by the person that is exposed to it.

In the investment context, there are a number of commonly encountered types of risk some of which are set forth herein. Please keep in mind that this post is being provided for educational purposes only and is not designed to be complete in all material respects. Thus, it should not be relied upon as providing legal or investment advice. If the reader has any questions concerning the contents of this post, you should contact a qualified professional.

Types of Risk:

Actuarial risk: Actuarial risk is the risk that an insurance underwriter covers in exchange for premiums, such as the risk of premature death.

Exchange risk: Exchange risk is the risk associated with such things as the chance of loss on foreign currency exchanges.

Inflation risk: Inflation risk is the chance that the value of your assets or income will be eroded over time as their value decreases because of inflation.

Interest rate risk: Interest rate risk refers to the possibility that a fixed-rate debt instrument will decline in value as a result of a rise in interest rates.

Inventory risk: Inventory risk relates to the possibility that price changes, obsolescence, or other factors will cause the value of inventory to shrink.

Liquidity risk: Liquidity risk concerns the possibility that an investor will not be able to buy or sell a commodity or security quickly enough or in sufficient quantities because buying or selling opportunities are limited. Limited buying or selling opportunities usually impact the purchase or sale price associated with the investment.

Political risk: Political risk describes the possibility of nationalization or other unfavorable government action.

Repayment (credit) risk: Repayment (credit) risk relates to the fact that a borrower or trade debtor will not repay an obligation as promised.

Risk of principal: Risk of principal describes the situation wherein invested capital will drop in value.

Risk of choice in selection of investment advisor: Risk of choice in the selection of a brokerage firm, investment advisor and/or account executive relates to the fact that, without proper due diligence on your behalf, the selection of an unqualified or low net-capital firm could cause you significant risk of loss as a result of unsuitable investment or strategy recommendations.

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Investment Objective, Risk and Suitability – South Florida Fraud, Mismanagement and Breach of Fiduciary Duty FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Mon, 13 May 2013 11:32:20 GMT

Investment Objective, Risk and Suitability: Why are They Important?

An investment objective is, in reality, nothing more than a client’s financial objective, which assists a stock broker in determining what type of investments would constitute a “suitable” recommendation for a client. It is one of the fundamental factors that any attorney looks at in attempting to determine whether the investments purchased, held or sold, in a client’s account, were appropriate (suitable) for that client.

For example, if an investor is seeking income, assuming that the account executive tells the truth about the investment or knows how to properly analyze the same, the client might opt-out of purchasing an investment that does not pay any type of income (for example dividends) to its shareholders as the investment would not be suitable to satisfy an income objective. Conversely, if an investor is seeking growth of capital, he or she should consider investments that have a higher potential for capital appreciation then an investment whose primary function is to pay income to its holder. Another popular type of investment objective is total return. Obviously, this type of investment objective combines elements of the income and growth objective, attempting to maximize return.

However, it is important to bear in mind that all investment objectives must be combined with the risk tolerance of an investor, which helps the investor ( or the stockbroker) narrow their search to an investment vehicle designed for the client’s needs at a particular time.

If you feel that unsuitable or inappropriate investments have been recommended to you by your account executive, you should seek a second opinion either from another brokerage firm or from a qualified attorney.

Please keep in mind that this post is being provided for educational purposes only. Thus, it is not designed to be complete in all material respects. It should not be relied upon as providing legal or investment advice. If the reader has any questions, you should consult with a qualified expert.

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“Stock Picking Robot” and Penny Stock – Florida Securities Fraud and Mismanagement Litigation and FINRA Abritration Attorney

Russell L. Forkey — Mon, 01 Apr 2013 18:49:26 GMT

Securities and Exchange Commission v. Hunter, Civil Action No. 12-cv-3123 (S.D.N.Y.)

BRITISH TWIN BROTHERS AGREE TO PAY $175,000 TO SETTLE MICROCAP PUMP-AND-DUMP CHARGES

The Securities and Exchange Commission recently announced that brothers Alexander John Hunter and Thomas Edward Hunter, both of Great Britain, have agreed to settle the Commission’s pending civil action against them. The Commission’s complaint, filed April 20, 2012 in the United States District Court for the Southern District of New York, alleges that the Hunters were just 16 years old when they began disseminating subscription-based e-mail newsletters through a pair of websites they created to tout stocks selected by a “stock picking robot,” which they described as a highly sophisticated computer trading program that was the product of extensive research and development. Some investors paid an additional fee for the “home version” of the robot software.

The Commission’s complaint also alleges that the brothers separately created a third website where they marketed their newsletter subscriber list to penny stock promoters and boasted, “One email to this list of people rockets a stock price.” The Hunters were in turn paid to send selected penny stock ticker symbols to their subscribers, who were misled to believe that the stock “picks” were the product of the robot. The Hunters sent out their newsletters near the beginning of the trading day, and the price and volume of the promoted stocks spiked dramatically as newsletter subscribers rushed to purchase shares. However, the stocks typically fell precipitously shortly thereafter, leaving investors in most cases with shares worth less than they had purchased them for earlier in the day.

According to the SEC’s complaint, the Hunters also offered subscribers a downloadable version of the stock picking robot for an additional fee of $97. Rather than performing the analysis advertised, the software was actually designed to deliver users a stock pick supplied by the brothers.

The Commission’s complaint alleges that by virtue of the conduct described above, the Defendants violated the antifraud provisions of the federal securities laws.

Under the announced settlement, the Hunter brothers, without admitting or denying the allegations in the Commission’s complaint, consented to the entry of a judgment requiring Alex Hunter to pay a $100,000 penalty, requiring Tom Hunter to pay a $75,000 penalty, and enjoining both brothers individually from future violations of Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder.

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Municipal Securities – MSRB Makes Continuing Disclosure Monthly Statistics Available on EMMA

Russell L. Forkey — Tue, 19 Mar 2013 13:26:16 GMT

MSRB MAKES CONTINUING DISCLOSURE MONTHLY STATISTICS AVAILABLE ON EMMA

The Municipal Securities Rulemaking Board (MSRB) recently announced that it has begun providing on its Electronic Municipal Market Access (EMMA®) website statistics on the number and type of disclosure filings that issuers of municipal securities make available to investors throughout the life of a bond.

These documents consist of important information about a municipal bond that arises after the initial issuance of the bond, such as annual financial information, bond calls and credit rating changes, for example. The continuing disclosure statistics on the EMMA website represent monthly volumes since 2010, categorized by types of disclosure. The disclosures themselves are also available on the EMMA website.

“Municipal securities investors and other market participants now have access to detailed information on the volume and types of continuing disclosure submissions,” said MSRB Executive Director Lynnette Kelly. “This is another significant step the MSRB has made to increase the availability of municipal market information to investors.”

The continuing disclosure statistics are available under the Market Statistics pages on the EMMA website. The dynamic format allows users to easily view, graph and compare different types of disclosures on a monthly basis for the last three years. In addition to the new continuing disclosure data, the Market Statistics section includes summaries of municipal trades and new issues of municipal securities as reported to the MSRB.

The MSRB’s EMMA website is a centralized online database that provides free public access to more than 800,000 official disclosure documents and trade data associated with municipal bonds issued in the United States. The EMMA website makes available real-time trade prices, primary market and continuing disclosure documents, and current credit ratings for more than one million outstanding securities, as well as current interest rate information, liquidity documents and other information for most variable rate municipal securities.

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Egan-Jones Ratings Company and Sean Egan – Florida Asset Backed Securities and Government Securities Fraud and Misrepresentation FINRA Arbitration and Litigation Attorney

Russell L. Forkey — Wed, 23 Jan 2013 10:16:16 GMT

Egan-Jones and Founder Sean Egan Agree to 18-Month Bars from Rating Asset-Backed and Government Securities Issuers as NRSRO

The Securities and Exchange Commission recently announced that Egan-Jones Ratings Company (EJR) and its president Sean Egan have agreed to settle charges that they made willful and material misstatements and omissions when registering with the SEC to become a Nationally Recognized Statistical Rating Organization (NRSRO) for asset-backed securities and government securities.

EJR and Egan consented to an SEC order that found EJR falsely stated in its registration application that the firm had been rating issuers of asset-backed and government securities since 1995 – when in truth the firm had not issued such ratings prior to filing its application. The SEC’s order also found that EJR violated conflict-of-interest provisions, and that Egan caused EJR’s violations.

EJR and Egan made a settlement offer that the Commission determined to accept. Under the settlement, EJR and Egan agreed to be barred for at least 18 months from rating asset-backed and government securities issuers as an NRSRO. EJR and Egan also agreed to correct the deficiencies found by SEC examiners in 2012, and submit a report – signed by Egan under penalty of perjury – detailing steps the firm has taken.

Egan and his firm were charged last year for falsely stating on EJR’s July 2008 application to the SEC that it had 150 outstanding asset-backed securities (ABS) issuer ratings and 50 outstanding government issuer ratings, and had been issuing credit ratings in these categories on a continuous basis since 1995. Egan signed and certified the application as accurate. According to the SEC’s order, EJR had not issued any ABS or government issuer ratings that were made available through the Internet or any other readily accessible means. Therefore, EJR did not meet the requirements for registration as a NRSRO in these classes. The Commission found that EJR continued to make material misrepresentations about its experience in subsequent annual certifications. EJR also made other misstatements in submissions to the SEC, and violated recordkeeping and conflict-of-interest provisions governing NRSROs – which are intended to safeguard the integrity of credit ratings.

EJR and Egan agreed to certain undertakings in the SEC’s order, including that they must conduct a comprehensive self-review and implement policies, procedures, practices, and internal controls that correct issues identified in the SEC’s order and in the 2012 examination of EJR conducted by the SEC’s Office of Credit Ratings. EJR and Egan consented to the entry of the order without admitting or denying the findings. The order requires them to cease and desist from committing or causing future violations.

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