New York Securities Fraud Lawyers Blog

Malecki Law Announces Investigation of IRA Services Trust Company and Fiserv, Inc. Arising Out of Investments with the Van Zandt Agency

August 25, 2011 | Malecki Law Team

Malecki Law, a New York securities law firm based in Manhattan, is currently investigating claims against IRA Services Trust Company and Fiserv, Inc. arising out of investments solicited and promissory notes issued through the Van Zandt Agency in relation to real estate investments in the Bronx, New York and elsewhere.

The Attorney General of the State of New York is currently investigating the practices of the Van Zandts and on April 6, 2011, filed an application in the Supreme Court of the State of New York for an order of discovery and preliminary injunction against the Van Zandts and other related agencies.

Based on the initial inquiry of the securities fraud lawyers of Malecki Law and the Attorney General’s investigation, there are questions about whether or not the Van Zandt Agency broke the law by engaging in the fraudulent issuance, promotion offer and sale of securities to the public in the State of New York. It is believed that hundreds and possibly thousands of investors may have lost money invested with the Van Zandts.

FINRA Issues Regulatory Notice 11-39 to Address Business Use of Social Media Websites

August 23, 2011 | Malecki Law Team

The talk among New York securities lawyers this week was all about the Financial Industry Regulatory Authority (FINRA) release of Regulatory Notice 11-39 addressing business use of social media website in the wake of surging popularity of social media tools such as Facebook and Google+. These social media tools make connecting with friends, colleagues and third-parties easy, but also raise novel questions related to the extent to which associated persons may use these sites for business use and registered principals must supervise such use.

Securities Exchange Act Rule 17a-4(b)(4), which requires the retention of copies of communications between members, brokers or dealers and the public of “business as such,” underlies Regulatory Notice 11-39. Thus, a firm’s or an associated person’s communications with the public through social media posts may require pre-approval by the firm and/or registered principal, and be subject to regulation by FINRA, depending on whether the communication is related to the firm’s “business as such” and is “static” as opposed to “interactive.” Generally, all communications related to a firm’s business as such must be recorded and preserved, while all static posting is deemed an advertisement requiring the firm’s pre-approval under NASD Rule 2210.

Regulatory Notice 11-39 begins to address the grey area of posting to message boards. Associated persons, be they advertising in the first place or responding to questions via such message boards, are limited to what they can say and claim. Thus, postings in static forums or blogs on websites would require pre-approval of all statements made relating to the firm’s business.

New SEC Whistleblower Rules Become Effective

August 12, 2011 | Malecki Law Team

Today, the SEC‘s new whistleblower program under the Dodd-Frank Act becomes effective, and is on the minds of many New York securities lawyers. These new rules were devised in such a way to provide an incentive for would-be whistleblowers to come forward and assist the SEC with investigations of possible securities law violations. Under these new rules, if an individual provides the SEC with original information about possible federal securities laws violations, and that information leads to a recovery by the SEC of $1 million or more, that individual would be entitled to receive up to 30% of the sanctions received by the SEC.

Under the new rules, internal reporting is encouraged, but it is not required. Individuals may instead go directly to the SEC. However, the value of internal compliance programs is addressed in the release, and there are incentives in place in the new rules to urge whistleblowers to report internally first.

There are also a few groups of individual who, for public policy reasons, are excluded from participation under the new rules. These include: compliance and internal audit personnel; officers, directors, trustees and partners who only discover the violations as a result of internal compliance procedures; public auditors who learn of the violations in the course of an engagement. However, these people may be eligible under certain circumstances, such as: they reasonably believe that disclosure is necessary to prevent the company from causing substantial injury to the property or financial interests of the company or investors; they reasonably believe that the company is impeding an investigation of the misconduct; or at least 120 days have passed since the initial internal report. Attorneys are also excluded, provided that they learned of the violations directly from attorney-client communications.

FINRA Rule Proposal Could Set the Stage For Broker Class Actions

July 29, 2011 | Malecki Law Team

Investment News reports that FINRA has authorized its staff to propose a new rule that would ban “collective action” employment claims under the Fair Labor Standards Act or the Age Discrimination in Employment Act from arbitration. This rule would have to be approved by the SEC before it could take effect, but it has potential longterm significance for New York securities lawyers and the American workforce at large.

Collective action claims differ from class actions in that a potential plaintiff must choose to “opt in” to the lawsuit, while class actions have the effect of automatically including covered plaintiffs, but allow individuals to opt out.

FINRA has maintained that its rules do not allow for collective or class actions in its dispute resolution system, but FINRA rules only mention class actions. Federal courts have repeatedly ordered that collective action wage and hour cases be heard in FINRA arbitrations.

FINRA Warns Investors to Watch Out For Hot Investments

July 26, 2011 | Malecki Law Team

FINRA issued a warning to investors yesterday to about the risks of seeking higher yield with structured products, junk bonds and floating-rate bank-loan funds. It is a reality of New York securities law that with fixed income yields at historic lows, many investors who want to avoid the volatility of the stock market have found themselves with seemingly nowhere to go.

Many of these investors have found themselves lured in by structured products promising of higher yield with “principal protection” or junk bond funds promising higher yield with “professional management”. FINRA reports that there have been significant increases in sales of high-yield bond funds, floating rate funds and structured products. These products have seen more than $100 billion in increased sales since interest rates fell.

However, average investors often don’t look into or have trouble understanding the risks and fees associated with these investments. Investors typically only focus on the higher returns that these investments offer but should also be aware that these products typically have higher risks and fees associated with them.

Kovel Rule no Guarantee of Accounting Privacy in New York Audits and Investigations

June 24, 2011 | Jenice L. Malecki, Esq.

In Why Your CPA Might Blab, by Arden Dale, the Wall Street Journal reports what your CPA knows could be subject to disclosure. As New York business lawyers know from experience, your accountant is not your attorney and he or she is not your priest.

Certainly when facing an audit or investigation, the first order of business is to consult an experienced New York business attorney to help protect your rights. As a decision we secured earlier this month illustrates (Salt Aire Trading LLC v. Enterprise Financial Services Corp.), communications involving your accountant may be privileged if assisting your law firm in your defense.

In that case, plaintiffs submitted to an in camera review of IRS audit documents for which attorney-client privilege was claimed. Plaintiffs claimed the documents were produced by plaintiffs’ attorneys and accountants for the purpose of legal advice. Defendants in the case contested attorney-client privilege. As the court noted, generally attorney-client privilege cannot be asserted in the presence of a third party, in this case the accountant. An exception would be if the accountant was facilitating attorney-client conversation, such as acting as an interpreter.The court found in this case that the accountant did act as a facilitator and that the plaintiffs met their burden of proof. Still, the court ruled portions of the documents not covered by attorney-client privilege must be disclosed.

Market Fundamentals Make Experienced Real Estate Advice Essential for New York Investments

June 24, 2011 | Jenice L. Malecki, Esq.

The state of today’s real estate market can differ from neighborhood to neighborhood, let alone market to market. Whether negotiating a commercial real estate transaction in New York, or making a real estate investment, knowing the market and having a New York real estate law firm with the experience to protect your rights can be critical to the long-term financial well-being of any endeavor.

As the Wall Street Journal reports, the college towns of Cambridge, Massachusetts and Denton, Texas would appear to have little in common. Yet both have seen substantial recovery in the real estate market. Using information available through the real estate site Zillow, The Journal determined 25 communities have rebounded nearly to pre-recession levels. However, none of these locations experienced the huge run-ups common in Florida, Nevada and California.Some common indicators are the strength of the employment and rental markets. The healthier communities also have fewer foreclosures flooding the market. New York real estate investment attorneys continue to see terrific opportunity in the market. However, the many competing factors make it more complex than ever; consulting an experienced law firm can help ensure you avoid many of the pitfalls inherent in today’s real estate market.

In other markets, The Journal reports housing prices are not likely to see substantial recovery until 2014.

Embedded Regulators Increase Wall Street Enforcement Efforts

June 24, 2011 | Jenice L. Malecki, Esq.

William S. Burroughs famously said “Sometimes paranoia’s just having all the facts.”

And the fact of the matter is in today’s regulatory environment you might be surrounded by regulators in the elevator, as the Wall Street Journal so aptly put it. Our New York Securities Lawyers understand the added pressure faced by many banks and investment companies in the wake of the economic collapse. In true government fashion, the increased scrutiny does not necessarily mean increased training or increased resources. Instead, it’s just as likely to mean “rush to judgment.” As an employee, it’s more important than ever to keep proper documentation, to avoid shortcuts, and to not give in to pressure.For investors weary of the seemingly weekly stories about Ponzi schemes and cases of securities fraud in New York and elsewhere, increased regulatory enforcement is a step in the right direction. However, possible conflict-of-interests continue to exist, as evidenced by the often cozy relationship between regulators and their charges. Restrictions are needed to prevent investigators from taking high-paying jobs from the very people they have been charged with regulating.

The Journal reports the Federal Reserve Bank of New York and the Office of the Comptroller of the Currency are increasing the number of examiners who go to work every day for the companies they regulate. Such regulators embed themselves at companies like Bank of America and Goldman Sachs Group.

A New York Resident’s Intervention Helps Bring Settlement With Hedge Funds

June 15, 2011 | Malecki Law Team

The Wall Street Journal reported over the weekend about how one New York resident investor who lost his small stake in Washington Mutual once it was seized by the United States government in 2008 played a pivotal role in protecting the rights of similarly places investors. New York securities and whistleblower lawyers know there too be all too many investors in the same boat.

Nate Thoma, a self-taught trader who was wiped out when the U.S. government intervened in WaMu, discovered that he could recoup his losses by investing in trust preferred securities, which he bought through online trading account when they became available. The trust preferred securities essentially places the holder in the front of the line for any money distributed from WaMu’s estate once it emerged from bankruptcy. The Wall Street Journal reported that Mr. Thoma suspected hedge funds were buying substantially more blocks of these trust preferred shares while also owning the bank’s bonds.

And in December 2010, Mr. Thoma explained his theory to the Delaware bankruptcy court judge in the case In re Washington Mutual, Inc.: since the hedge funds were both bond holders in settlement talks, and owners of substantial swaths of trust preferred shares, were the hedge funds acting in the trust preferred holders’ best interest when they negotiated on their behalf?

HSBC Pays $62.5 Million to Settle Allegations of Securities Fraud in New York

June 9, 2011 | Jenice L. Malecki, Esq.

New York securities lawyers are taking notice at the decision rendered to have HSBC pay $62.5 million in a class-action lawsuit claiming the bank was negligent as the custodian of client money lost in Bernie Madoff’s investment scam, according to Erik Larson and Linda Sandler’s article “HSBC Agrees to Pay $62.5 Million to End Madoff Civil Case” in Bloomberg’s Businessweek.

The civil securities fraud claim in New York was filed against HSBC and other defendants by investors in the Ireland-based Thema International Fund Plc. HSBC admitted no wrongdoing as a result of the settlement.New York securities attorneys have seen a slew of cases alleging investment fraud since the beginning of the economic downturn. Of course, the Madoff scandal has made international news. But there have been hundreds of others involving securities, real estate investments and other investment vehicles. In many cases, people simply made bad investments or were caught holding an investment when the bottom fell out of the market.

In other cases, mid-level executives are facing allegations of failure to supervise, failure to execute or breach of fiduciary duty. In all cases, the best defense is to bring in a New York securities law firm as early as possible once allegations have been made or an investigation has been initiated.