Bond Dealers

SEC Chairman Mary Jo White Wants Reforms Made to Bond Market

Published on: June 23, 2014 | by Shepherd Smith Edwards & Kantas, LLP

U.S. Securities and Exchange Commission Chairman Mary Jo White wants significant reforms made to the bond market. Speaking at the Economic Club of New York, White spoke about how trading in these fixed income markets are “highly decentralized.”

She expressed concern that technology was being used in these markets to make this decentralized approach to trading more beneficial for market intermediaries.

According to Reuters, White’s speech is a sign that the SEC is at last making an effort to implement recommendations it made in 2012 about the $3.7 million municipal securities market. The regulator is launching an initiative that would mandate that alternative trading systems and other electronic dealer networks make available to the public their best prices for municipal bonds and corporate bonds. This should give smaller retail investors, and not just certain select parties, pre-trading price data.

Morgan Keegan Again Ordered by Arbitrators to Pay Bond Fund Losses to Investors

Published on: October 27, 2009 | by Shepherd Smith Edwards & Kantas, LLP

Morgan Keegan & Co. has been ordered to pay $51,000 to Larry and Diane Papasan. Larry Papasan is Memphis Light, Gas and Water Division’s former president.

The Papasans filed their arbitration claim against Morgan Keegan last year after they lost about $80,000 in the account they had with the investment firm. The Papasans’ claim is one of many arbitration cases and securities fraud lawsuits filed by Morgan Keegan investors who sustained RMK fund losses. The general accusation is that the broker-dealer misrepresented the volatility of the bond funds, which they allegedly were not managing conservatively.

Larry Papasan, who is retired, opened his account because he knew John Wilfong, a former Morgan Keegan financial adviser. Wilfong felt so confident about the bond funds that he even sold them to his mother, Joyce Wilfong, who also went on to suffer financial losses from her investment. Her friend Maxine Street also suffered bond fund losses.

The two women filed a joint arbitration claim against Morgan Keegan. Joyce was awarded $68,000, while Street settled for an undisclosed sum.

According to the Papasans, John Wilfong spoke with Jim Kelsoe, the RMK funds’ manager, prior to leaving Morgan Keegan for UBS. Kelsoe allegedly told Wilfong not to liquidate because the funds were safe. The Morgan Keegan fund manager is named in other cases for allegedly failing to disclose the risks associated with the mutual fund investments.

Related Web Resources:
Latest RMK Award Goes to Ex- MLGW Head, Memphis Daily News, October 27, 2009
Two Morgan Keegan Funds Crash and Burn, Kiplinger, December 2007 Continue Reading ›

Raymond James and RBC Capital Markets Fined $1.4 Million in Total Over Improper Stock Lending Activities

Published on: June 22, 2009 | by Shepherd Smith Edwards & Kantas, LLP

The Financial Industry Regulatory Authority says that RBC Capital Markets Corp., Raymond James & Associates, Inc., and an RBCCMC head trader have settled charges over alleged broker misconduct connected to stock loan improprieties. RJF is to pay a $1 million fine, while RBC Capital Markets will pay $400,000.

Meantime, RBCCMC Stock Loan Department head trader Benedict Patrick Tommasino has agreed to a $30,000 fine, a 20-month suspension from working for a securities firm, and another two-month suspension from acting in a principal role.

According to FINRA, RJF allegedly executed payments that were improper and unjustified to finder firms even though the companies didn’t provide services to locate the securities and they weren’t involved in the stock loan transactions for which they were receiving payments. For example, in March and 2004, Raymond James paid two finder firms for 11 transactions even though they didn’t perform a service. A Raymond James loan trader’s son was employed at one of the finder firms.

FINRA is also accusing the two broker-dealers of allegedly letting Dennis Palmeri, Sr. perform stock loan functions. Only registered individuals are allowed to perform this role.

Palmeri is a non-registered person that had been barred from the securities industry. He was previously convicted of federal securities law violations in 1994. Following his conviction, the SEC barred him from working for an investment advisor, a broker dealer, or an investment company. While Palmeri can act as a non-registered finder, he cannot perform roles requiring that the individual be registered.

Susan Merrill, the FINRA enforcement chief, says the two firms exposed the market to an individual that was non-registered, unqualified, unsupervised, and was not allowed to work in the securities industry. FINRA also claims that the two broker-dealers failed to reasonably supervise their Stock Loan Departments. By agreeing to settle, Tommasino and the two broker-dealers are not denying or admitting misconduct.

Related Web Resources:
FINRA Fines Raymond James, RBC Capital Markets Corporation, Stock Loan Trader for Improper Stock Loan Practices, FINRA, June 17, 2009
FINRA fines Raymond James, RBC Capital Markets, Forbes, June 17, 2009 Continue Reading ›

Securities Law Firm Shepherd Smith Edwards & Kantas LTD LLP Investigates Investor Claims Related to Short Term Bond Funds

Published on: August 9, 2008 | by Shepherd Smith Edwards & Kantas, LLP

SSEK law firm, which specializes in investor claims, is investigating compliants over the liquidity and security of so-called “ultra-short term” bond funds. Because these funds were sold as cash alternatives, any loss of principal is not acceptable. Recently, investors have experienced subtantial losses on a number of these funds, including:

SSgA (STATE STREET) Yield Plus Fund: Investors have accused this fund of violating Federal Securities laws. Usually considered a diversified portfolio with high quality credit and debt securities, and “sophisticated credit analysis” and decisions made by a team of investment professionals, the Fund was actually heavily invested in high-risk mortgage-related securities and mortgage backed securities.

Fidelity Ultra-Short Bond Fund: Investors claim that they were told the fund’s goal was to seek a high level of current income that was in line with preserving capital. The plaintiffs’ litigation, however, allege that such statements were misleading and false because the fund failed to properly disclose that it was heavily invested in high risk mortgage-backed securities.

Evergreen Ultra Short Bond Fund: According to recent litigation, investors bought shares because they were told that the fund’s investment goal was to “provide current income consistent with the preservation of capital and low principal fluctuation.” Statements such as these are now being called misleading and materially false because the fund used a high-risk strategy (which it did not reveal to investors) that resulted in realized losses of about 18%.

Charles Schwab YieldPlus Funds — Schwab YieldPlus Select, Schwab California Tax Free YieldPlus, Schwab YieldPlus: Charles Schwab has been accused of violating industry regulations and state securities laws when it allegedly mislead investors about the fund’s underlying risks. All three Schwab funds’ losses have been magnified by mass redemptions.

Oppenheimer Rochester National Municipals: Although not technically an ultra short term bond fund, this high-yield municipal bond can experience short-term volatility. These kinds of bonds are thinly traded and investors could suffer when the bonds are sold into an unreceptive marketplace.

Related Web Resources:

Shepherd Smith Edwards & Kantas LTD LLP Investigate Short Term Bond Funds, PrimeNewswire.com
Shepherd Smith Edwards & Kantas LTD LLP
Continue Reading ›

Wells Fargo Brokerage Services. FTN Financial, and Stone Youngberg Among Founders of Regional Bond Dealers Association

Published on: March 18, 2008 | by Shepherd Smith Edwards & Kantas, LLP

14 regional bond dealers have founded Regional Bond Dealers Association (RBDA). The purpose of the association is to tackle issues that are important to U.S. regional, fixed-income securities dealer. Issues to be examined include revising the tax code and matters affecting auction-rate securities.

Founding members are:

• Wells Fargo Brokerage Services LLC.