Protecting Investors - Securities law attorneys investigating financial fraud and Wall Street misconduct involving Lehman Brothers, non-traded REITs, bonds, ETFs

Vernon Healy files multimillion dollar investor claim against Citi Smith Barney relating to municipal bonds and preferred stocks

Naples, Fla. — The Vernon Healy law firm filed a claim against Citi Smith Barney today on behalf of a Naples couple who suffered millions in losses following their stockbroker’s  trades in the couple’s account without their permission and inappropriate investing activity in municipal bonds and preferred stocks.  Read More...

Unlisted REITs such as Piedmont/Wells, Inland, Behringer Harvard, Cole, Desert Capital, Dividend Capital, Grubb & Ellis, Whitestone, and KBS illustrate redemption and valuation risks for investors

More and more investors in unlisted REITs are awakening to the “Hotel California” effect: They can’t get out of their REIT investment. 

According to “The Non-Listed REIT Blog,” a subscription newsletter covering non-listed REITs for due diligence analysts and others, six of the biggest REITs  have halted their redemption programs.  These six REITS are:  Piedmont Office Realty Trust, Inland American Real Estate Trust, Inland Western Retail Real Estate Trust, Wells Real Estate Investment Trust II, Behringer Harvard REIT I and Cole Credit Property Trust II.   The same Non-Listed REIT Blog is also reporting that other REITS such as Behringer Harvard Opportunity REIT I, Desert Capital REIT, Dividend Capital Total Realty Trust, Grubb & Ellis Apartment REIT, KBS Real Estate Investment Trust and Whitestone REIT have stopped redeeming or been unable to redeem all the submitted shares. 

Accompanying this illiquidity problem, are potential valuation problems.  For example,  after closing the redemption program, Piedmont/Wells reported a net asset value decline of 15 percent — from $8.38 to $7.40 per share — along with a dividend reduction.   

These examples highlight the valuation and liquidity risk issues faced by investors with unlisted REITs.  Arguments that private and non-traded REITs perform better than publicly traded REITs is cold comfort if an investor can’t redeem at par or above — or can’t redeem at all because redemptions have been frozen or limited to a small number of investors. 

A potential inability to trade and liquidate shares, coupled with a decreased dividend, places unlisted REIT investors in dangerous financial waters. These investors find themselves with essentially illiquid assets with decreasing yields in a deteriorating economic environment.  We believe this is an especially troubling situation with respect to REITs that have a concentration of commercial properties purchased around 2006 or 2007 in bubble areas such as Florida or California and/or REITs with weak commercial tenants and/or high leverage and low liquidity.   

The value of shares in a publicly traded REIT is more reliable and discernible because these investments are priced daily by way of investors’ purchases and sales in an open market. In contrast, shares of privately traded REITs with little or no market are priced by the same REIT managers and operators who selected properties for inclusion in the REIT portfolio. In essence, they are giving themselves their own report cards. 

What is most troubling about this pricing issue for unlisted REITs is that it enables incompetent or unethical financial advisors who heavily promote and sell these products to inappropriately downplay the true risks of these unlisted REITs simply because the prices don’t move daily on an exchange.   When this lack of price transparency is coupled with the high commissions that unlisted REITs pay to financial advisors to sell these REITs, the REITs are dramatically oversold to investors looking to avoid the risks of the equities markets, we believe.  

In our opinion, investors who believe they were not informed of the true characteristics and risks of unlisted REITS and/or investors who are in or near retirement with significant portions of their investable assets in nonpublic or private REITs should have their portfolios independently evaluated. 

Vernon Healy represents investors who have been the victims of negligence or unethical behavior by investment professionals and who have suffered significant investment losses.  For more information about Vernon Healy’s efforts on behalf of investors click here.

Schwab YieldPlus Fund: Where Are The Schwab Private Client and Schwab Managed Portfolio Claimants?

Vernon • Healy, in partnership with a team of lawyers, represents clients throughout the United States who invested in the Schwab YieldPlus Fund as a result of the advice they received from the Charles Schwab brokers assigned to their accounts.  However, Charles Schwab also offers two programs to investors who are interested in obtaining and paying for more comprehensive advice with respect to managing their investment portfolios.  Did those Charles Schwab customers receive the same advice about their Schwab YieldPlus investments?

The Schwab Private Client program assigns a Charles Schwab Financial Consultant to the client who works with a Portfolio Consultant to provide “customized guidance that reflects your unique situation and goals” and make “. . . fact-based recommendations . . .”  to the client, according to the Charles Schwab website (March 30, 2009).  This service is available for an annual asset-based fee starting at 0.75% for equities and 0.50% for fixed income investments.

Charles Schwab also offers a “Schwab Managed Portfolios” program to its clients.  Charles Schwab investment professionals design a diversified asset portfolio consisting of Schwab and/or non-Schwab mutual funds.  After the portfolio has been designed, the portfolio managers monitor the performance of the portfolio, replacing low-rated funds and engaging in asset class rebalancing as needed.  According to the Charles Schwab website, portfolio managers rely upon recommendations from the Schwab Center for Financial Research in designing and restructuring the client’s managed portfolio.  Charles Schwab clients presently pay fees that range from 0.25% to 0.50% of the non-cash assets in the portfolio.

The stunning collapse of the Schwab YieldPlus ultrashort bond fund from June 2007 Net Asset Value (“NAV”) - $9.67 per share on June 29, 2007 through April 30, 2009 (NAV - $4.65, down 51.9% - has been discussed at great length by financial journalists, attorneys and investors on internet posts.  When the fund started to experience huge redemptions in August 2007, it was forced to sell illiquid asset-backed and mortgage-backed securities at distressed prices.  These sales prompted more and more redemptions and distressed sales of illiquid securities throughout the remainder of 2007 and in 2008.  The total assets managed by the Schwab YieldPlus fund has plummeted from $13.491 billion on July 31, 2007 to $159 million as of March 31, 2009 (down 98.8%).

The steepest decline in the Schwab YieldPlus Fund’s NAV took place from January 31, 2008 through April 1, 2008.  This decrease coincides with the time period that the portfolio managers of the Schwab Retirement Income Fund and four of the Schwab Target Funds were selling a total of almost 3 million Schwab YieldPlus Fund shares from these funds’ respective portfolios.

On January 31, 2008, the Schwab YieldPlus Fund NAV closed at $8.93 per share (a decline of a little less than 10% from the Summer 2007 price).  On April 1, 2008, Charles Schwab posted the following notice on its website: “Several Schwab Funds have redeemed shares of the Schwab YieldPlus Fund.  On April 1, 2008, the Schwab Retirement Income Fund redeemed its last remaining shares, resulting in Schwab Funds no longer holding the Schwab YieldPlus Fund.”  The Schwab YieldPlus Fund closed at $6.80 per share on that day, down (-27.82%) from the fund’s June 29, 2007 NAV of $9.67 and down (-21.84%) from January 31, 2008, the date that the Schwab Retirement Income Fund and the four other Schwab Funds collectively held almost 3 million shares of the fund.

Members of our team have spoken to over 100 Schwab YieldPlus Fund investors who sustained significant losses in the fund.  Based upon those interviews, we know that Charles Schwab financial consultants and fixed income specialists were widely soliciting and recommending the fund to Charles Schwab customers.  We also know that Charles Schwab was aggressively marketing the fund to all of its customers on its website, in press releases and in its investor newsletters.  It is statistically improbable that not a single Charles Schwab Private Client or Schwab Managed Portfolio client would have contacted our team, unless these clients were advised to sell their shares in the fund in sufficient time to incur more modest losses relative to those who were not advised.

Schwab YieldPlus Fund investors’ losses accelerated very quickly in March of 2008, immediately prior to Charles Schwab’s April 1, 2008 announcement that the Schwab Retirement Income Fund and other Schwab proprietary funds had sold all of their Schwab YieldPlus Fund shares.  We have spoken to one investor whose Charles Schwab financial consultant told him on or about March 12, 2008 that substantial numbers of Charles Schwab Private Clients had owned the Schwab YieldPlus Fund and that Charles Schwab had already started advising these particular clients to sell the fund.

We are continuing to investigate the issue of when Charles Schwab advised its Schwab Private Advice clients to sell the Schwab YieldPlus Fund and when portfolio managers managing the Schwab Managed Portfolio clients’ accounts sold their clients out of the fund. As part of our continuing investigation, we would like to hear from Schwab Private Client or Schwab Managed Portfolio Program participants to discuss their experiences with the Schwab YieldPlus Fund.  In addition, is our belief that Schwab Private Clients and Schwab Managed Portfolio clients may have valid Schwab YieldPlus Fund claims worth pursuing.

If you are a Schwab Private Client or a Schwab Managed Portfolio Program participant, please contact Vernon • Healy.

Vernon Healy Set to File Additional Lehman Notes Case against UBS

Naples, Florida – Vernon Healy is talking with investors throughout the US as well as international investors with potential claims relating to the sale of Lehman structured notes by UBS.

For example, a newly retired couple from the Midwest (winter residents of Southwest Florida) have retained Vernon Healy to represent them in their claim against UBS for gross misconduct. The couple were approached by their trusted brokers at the Bonita Springs branch of UBS to put both retirement money and inherited money into a new investment product – Lehman Brothers Principal Protected Notes.

Shortly after they purchased the notes, Lehman Bothers declared bankruptcy. The couple have now been offered less than three (3) cents on the dollar (i.e. less than 3% of the 2008 purchase price from a third-party buyer).

As investment professionals, UBS was well aware, or should have been well aware, that credit risk was an issue, especially since it sold the couple the Lehman notes after Bear Stearns’ collapse. After Bear Stearns’ insolvency crisis and near bankruptcy, UBS was well aware (or was recklessly ignorant) that credit risk had become an even greater concern for purchasers of structured notes. Nevertheless, UBS sold Lehman notes to these retirees.

Structured note sales have exploded recently in the U.S. as the brokerage industry discovered how much money they can make using a pitch that fails to adequately disclose the risks, complexity, and costs of these products. Instead, brokerage firms pitch the appealing "concept" of upside potential with downside protection.

The complexity of the product effectively conceals the flaws in the "concept" and hides the true risks from the investor. Brokerage firms’ own internal pitches to local financial advisors often emphasize the high commissions (usually in the range of 3%) and the short term of the products (which allows for recurring sales opportunities), while deemphasizing the risks (especially credit risk), diversification problems in overselling these products, outrageous internal costs and the regulatory requirements for pitching structured products to retail customers.

The result has been an explosion of structured notes sales to customers in the U.S. In 2004, approximately $32 million in structured notes were sold in the U.S. Within two years, in 2006, the amount of sales of structured notes had doubled to $64 million. The next year (2007), that number nearly doubled again to more than $110 million.

The retired couple in this article is the latest in a number of Lehman structured note investors who have turned to the Vernon Healy law firm for help in weighing their legal options, which include filing individual or group arbitration claims with the Financial Industry Regulatory Authority (FINRA). 

Vernon Healy is a Naples, Florida based law firm that assists investors nationwide in recovering significant losses caused by all manner of financial fraud and negligence in both court and arbitration.

The firm handles a wide variety of business and investment related matters, including disputes involving various types of securities and investments — e.g., REITs (Real Estate Investment Trusts), bonds and bond funds, TICs (tenancy in common), tax shelter products and strategies, program trading, land trusts, trustee malfeasance, subprime products, debt obligations, structured products such as ETFs and ETNs, pension and retirement funds, and other financial product and strategy issues.

Vernon Healy law firm files claim for more than $900,000 against UBS on behalf of charitable trust that invested in Lehman notes

Naples, Fla. — UBS engaged in gross misconduct when it marketed more than $900,000 in Lehman notes to a charitable trust as a safe and “principal protected” investment after public warning signs about Lehman Brothers’ financial solvency had surfaced, according to a claim filed today by the Vernon Healy law firm. 

The charitable trust, which gives to environmental causes, the arts and youth programs, stands to lose more than a $1 million on Lehman notes and other structured products sold to it by UBS. 

According to the UBS sales pitch, principal protected notes would return the entire original principal investment back to the investor even under a worst case scenario.  However, the notes were in fact risky, unsecured loans to Lehman Brothers, according to the claim. 

When an issuer goes bankrupt, as Lehman Brothers did, holders of structured notes are left standing at the back of the line with other unsecured creditors and they may recover little, if anything, of their original investment.

Structured products, including principal protected notes, were initially sold only to institutional investors.  More recently, major brokerage firms, including UBS (UBS), Merrill Lynch (MER), Barclays (BCS) and Wachovia (WB), have pushed their sales forces to dump these products on their own retail customers, said securities attorney Chris Vernon.

As early as 2005, industry regulators from the Financial Industry Regulatory Authority (formerly known as the NASD) raised concerns about the way that complex structured products, including structured notes, were being marketed to individual investors.  At least one European country has outlawed the recommendation of structured products to retail investors.

In the case of the charitable trust, the UBS investment advisor urged the purchase of Lehman notes in February and March, 2008, after significant concerns about Lehman’s creditworthiness surfaced within the investment world that UBS operates, according to the claim.

In fact, UBS sold the trust more than $600,000 in Lehman notes after the collapse of Bear Sterns and Lehman’s 2008 first quarter report raised concerns in the financial industry about its balance sheet.  As investment professionals, UBS was well aware, or should have been well aware, that credit risk was an issue when it sold the Lehman notes, the claim asserts.   

The Vernon Healy law firm is helping multiple Lehman structured note investors weigh their legal options, which include filing individual or group arbitration claims with the Financial Industry Regulatory Authority (FINRA). 

Through formal claims, the Vernon Healy law firm intends to show that conflicts of interest led UBS to misrepresent and inappropriately recommend Lehman notes and other structured notes to a wide variety of its trusting base of retail clients.

Vernon Healy is a Naples, Florida based law firm that assists investors nationwide in recovering significant losses caused by all manner of financial fraud and negligence in both court and arbitration.

The firm handles a wide variety of business and investment related matters, including disputes involving various types of securities and investments — e.g., hedge funds, TICs (tenancy in common), bonds, variable pre-paid forward contracts,  mortgage and debt obligations, pension and retirement funds.
URL:

For more information, contact:
Christopher T. Vernon, attorney at law
Susan R. Healy, attorney at law
http://www.vernonhealy.com
http://www.protectinginvestors.com
(239) 649-5390
Toll Free: (877) 649-5394
email: acostanzo@vernonhealy.com

Lehman bankruptcy information for owners of Lehman notes and other Lehman structured products

If you own Lehman Brothers structured products, the Bankruptcy Court makes it easy for you to file your claim in the Lehman bankruptcy proceedings.  You may file your own proof of claim, or have your attorney file a claim on your behalf, but you also have a convenient alternative.

Wilmington Trust Company will represent the interest of investors who own Lehman structured products — including Lehman Principal Protected Notes — by filing a global claim in the bankruptcy.  In order to participate, you just need to complete the one-page Trustee’s Mailing Matrix and send it to Wilmington Trust.  If you own Lehman structured products (sometimes referred to as Lehman notes), you should have already received your copy of the Trustee’s Mailing Matrix in the mail.  However, if you do not have your form, click on the link at the bottom of this article to download a copy. 

You will need the following information in order to complete the Matrix form: 

• The name of your broker or investment advisor

• A list of the products you own, including the amounts and the CUSIP numbers.  CUSIP (Committee on Uniform Securities Identification Procedures) numbers are unique identifying codes that are assigned to all securities.  CUSIP numbers for individual products can be found on trade confirmations, which are the notices you receive when you buy or sell a security. 

It is too early to know how much, if anything, Lehman notes and structured products investors will recover in the Lehman bankruptcy.  At this point, it is not even clear what priority structured notes and other structured products will be given.

Ordinarily, structured product holders should have the same priority as bond holders; however, the bankruptcy court could decide to treat structured product claims differently.  One reason for differentiating between bond holders and structured product holders is that while a value can be readily established for bonds, structured products had no established price prior to maturity.   

Vernon • Healy recommends that Lehman structured product holders pursue all their recovery options.  In addition to filing a bankruptcy claim, investors with small claims should consider participating in the class action (which means timely completing and returning the class action claim forms). 

Vernon • Healy represents investors with larger losses who will likely fare better by pursuing their claims on an individual basis, as opposed to participating in the class action.  Click here to read more about Vernon • Healy’s efforts on behalf of individual investors with larger claims and click here to read more about the firm.   

Click here to download the Trustee’s Mailing Matrix.

California investor rights attorney Thomas Mauriello, of the Shine-Vernon legal team, files claims on behalf of Schwab YieldPlus Fund (SWYSX) investors with more than $200,000 in losses

San Francisco, California — Three California retirees with principal losses totaling over $200,000 filed claims today against Charles Schwab & Co. and its former high-profile fund manager, Kimon Daifotis, asserting that Schwab deceptively marketed its Schwab YieldPlus Fund as a “cash alternative” with safety comparable to that of 1 and 2-year certificates of deposits.  

The Schwab YieldPlus Fund, (SWYSX), which was marketed to investors as a safe, ultra short-term bond fund, actually contained high concentrations of mortgage- and asset-backed securities that exposed fund investors to the risk of substantial losses of principal, the claim asserts.

“The Schwab YieldPlus Fund was significantly riskier than Charles Schwab represented,” said Thomas D. Mauriello, a California investor rights attorney who filed today’s claim along with former SEC enforcement attorney Thomas Shine and investor rights attorney Christopher Vernon.

Mauriello noted that shares of other ultra short-term bond funds lost less than 2 percent of their value, on average, from June 30, 2007 to June 30, 2008.  During that same time, Schwab YieldPlus Fund shares dropped 31.62 percent — a loss that was more than double the decline of the S&P 500 Index for the relevant period.

“The Schwab YieldPlus Fund is virtually alone among its peers in exposing conservative investors to these kinds of steep losses of principal,” Mauriello said.

Moreover, Schwab profited handsomely from its deceptive marketing of the Schwab YieldPlus Fund to conservative investors as the fund experienced tremendous growth, according to the claim.

From 2003 to 2007, Charles Schwab Investment Management, a wholly-owned subsidiary of parent Charles Schwab Corp., saw its annual management fees of the Schwab YieldPlus Fund grow by 600 percent, the claim states. Schwab earned management fees of $76 million during that time, as the fund grew to peak net assets of $13.5 billion on July 31, 2007.   

By May 31, 2008, the fund’s net assets had plunged by more than 96 percent to $507 million. 

This risky investment composition of the Schwab YieldPlus Fund by fund managers compromised the fund’s liquidity and forced it to sell off asset-backed and mortgage-backed securities at distressed prices as more and more investors sought redemptions beginning in August 2007, the claim asserts.    

One of the retirees who filed a claim today, a 69-year-old widow from Rio Vista, California, thought her investment in the Schwab YieldPlus Fund was virtually the same as a money market fund investment based on the representations of her Schwab investment advisor, the claim states.

Also filing a claim today was a retired couple from Solvang, California who lost approximately $166,000 of their principal investment in the Schwab YieldPlus Fund.

Securities fraud litigators in the Shine-Vernon legal team have now filed claims on behalf of both corporate and individual Schwab YieldPlus Fund investor clients in California, New York, Texas, Florida, Missouri, Minnesota, Illinois and Hawaii, and they are currently investigating claims on behalf of investors in multiple other states. The team includes former SEC enforcement attorneys, former federal and state prosecutors, and investor rights attorneys from California, New York, Florida, Texas and Illinois.

Contact:
— Christopher T. Vernon, an investor rights attorney who represents investors throughout the United States (Florida, 239-649-5390, www.vernonhealy.com) — Thomas D. Mauriello, an investor rights attorney who represents investors throughout the United States (California, 888-612-1961, www.maurlaw.com);
— Thomas F. Shine, a former Securities and Exchange Commission (“SEC”) Division of Enforcement attorney (Florida, 800-838-8320, www.thomasfshinelaw.com);
Keywords: Schwab YieldPlus Fund, Yield Plus, SWYSX, SWYPX, Charles Schwab, investor losses, safety, securities attorney, arbitration, settlement.

Shine-Vernon legal team: Fund Manager of Schwab YieldPlus Fund (SWYSX) and Schwab California Tax Free YieldPlus Fund (SWYCX) deceived retirees with assurances of safety

San Francisco, California — Charles Schwab & Co. and its former high-profile fund manager engaged in deception and dishonest conduct when they misrepresented  the Schwab YieldPlus Fund and the Schwab California Tax Free YieldPlus Fund as safe investments for investors seeking to protect their principal.  In fact, the funds’ high concentrations in risky and mostly illiquid securities exposed investors to the risk of substantial losses of principal, according to an arbitration claim filed today on behalf of a retired California couple.

The couple, a retired corporate executive and his wife, lost more than $300,000 in the funds (SWYSX and SWYCX), which were marketed by Charles Schwab as “cash alternatives” with safety akin to money market funds and certificates of deposit.  

 

“It is particularly disturbing that many of the investors in SWYSX and SWYCX are elderly investors and retirees,” said Thomas D. Mauriello, a California investor rights attorney who filed today’s claim along with former SEC enforcement attorney Thomas Shine and investor rights attorney Christopher Vernon.

 

“These investors were not interested in risk.  With respect to the Schwab California Tax-Free YieldPlus Fund, they expected a low-risk fund to generate modest tax free income.  Instead, they suffered significant losses to their principal because the fund was dramatically riskier than Charles Schwab represented it to be.”

The claim accuses Charles Schwab of failing to disclose or misrepresenting the risks associated with the concentration of the Schwab YieldPlus Fund in high-risk mortgage and asset-backed securities. This concentration compromised the liquidity of the fund and forced it to sell off asset-backed and mortgage-backed securities at distressed prices as more and more investors sought redemptions beginning in August 2007, the claim asserts.

 

 

Illiquidity coupled with investor redemptions plunged the Schwab YieldPlus Fund into a catastrophic free-fall: The fund saw net assets peak at $13.5 billion on July 31, 2007 and by May 31, 2008, the fund’s assets had plunged by more than 96 percent to $507 million.  

   

In the Schwab California Tax Free YieldPlus Fund, Schwab fund managers put increasing portions of the fund’s portfolio assets into auction rate securities and floating rate bonds. These investments compromised the liquidity of the Schwab California Tax Free YieldPlus Fund and contributed to the funds’ decline in the face of large investor redemptions, the claim asserts. The SWYCX fund’s total managed assets plummeted from $1.2 billion as of July 31, 2007 to $157 million just 13 months later.

 

 

The claim filed today effectively alleges that Schwab and former fund manager Kimon Daifotis engaged in misconduct when they embarked on a damage control campaign to avoid liquidations of the Schwab Yield Plus Fund by  Schwab clients while, behind the scenes, Schwab dumped 2.9 million Schwab YieldPlus Fund shares from the portfolios of other Schwab proprietary mutual funds.

 

 

These deceptive tactics effectively encouraged customers to hold on to their shares allowed Schwab’s broker-dealer arm and fund manager Daifotis to liquidate Schwab YieldPlus Fund shares from other Schwab mutual funds and obtain better selling prices ahead of their own retail customers, according to the claim.

 

 

Securities fraud litigators in the Shine-Vernon legal team have now filed claims on behalf of both corporate and individual Schwab YieldPlus Fund investor clients in California, New York, Texas, Florida, Missouri, Minnesota, Illinois and Hawaii, and they are currently investigating claims on behalf of investors in multiple other states.

The team includes former SEC enforcement attorneys, former federal and state prosecutors, and investor rights attorneys from California, New York, Florida, Texas and Illinois.

Contact:

— Christopher T. Vernon, an investor rights attorney who represents investors throughout the United States (Florida, 239-649-5390, www.protectinginvestors.com)

Schwab YieldPlus Fund, Yield Plus, SWYSX, SWYCX, Charles Schwab, floating rate bonds, auction rate securities, safety, securities attorney, class action, arbitration, settlement.

Shine-Vernon legal team forms alliance with former SEC regulators to investigate Schwab YieldPlus Fund, files claim on behalf of investor who lost more than $225,000 on YieldPlus (SWYSX, SWYPX)

Naples, Fla. — The Shine-Vernon legal team has formed a coast-to-coast alliance with other former Securities and Exchange Commission regulators, former prosecutors and investor advocates to investigate misconduct and seek recovery of losses for purchasers of the Schwab YieldPlus Fund.

 

Securities fraud litigators in the alliance have now filed claims on behalf of both corporate and individual investor clients in California, New York, Texas, Florida, Missouri, Minnesota, Illinois and Hawaii, and are currently investigating claims on behalf of investors in multiple other states.

 

The team filed another arbitration claim today on behalf of a California retiree who sustained more than $225,000 in Schwab YieldPlus Fund losses in his retirement savings account. Just prior to investing in the Schwab YieldPlus Fund, the retiree had the bulk of his retirement savings in cash or money market funds. Today’s claim follows earlier claims filed by the team on behalf of corporate and small business owners, a retired publisher, a retired accountant, a retired emergency room physician, a retired computer consultant and an 82-year-old widow — among others.

 

Charles Schwab & Co. marketed its Schwab YieldPlus Fund as a safe “cash alternative” to retirees and others around the country, but that safety was a charade: The Schwab YieldPlus Fund has lost more than 40 percent of its value in the past 18 months because of the reckless concentration of mortgage and asset-backed securities in the fund by former high-profile fund manager Kimon Daifotis.
 
Charles Schwab issued inaccurate statements or omitted information regarding material facts about the fund’s lack of diversification and deceived Schwab YieldPlus Fund investors by concentrating the fund in mortgage and asset-backed securities while it touted the fund’s safety on its web site and to financial advisors who recommended the fund, the claim states. Charles Schwab compared the safety of its Schwab YieldPlus Fund to that of one and two-year certificates of deposit.

 

“People from all walks of life invested in Schwab’s YieldPlus Fund, and investors who sought safety in YieldPlus are now paying dearly for Schwab’s betrayal,” securities attorney Christopher Vernon said. “We believe we’ve assembled an exceptional group of attorneys to bring claims on behalf of Schwab YieldPlus investors seeking recovery.”

 

For in-depth information about the Schwab YieldPlus Fund, see  http://www.protectinginvestors.comand http://www.thomasfshinelawblog.com

 

The alliance includes:

— Christopher Bebel, a former Securities and Exchange Commission Division of Enforcement attorney, former regulator with the Financial Industry Regulatory Association (aka NASD) and former federal prosecutor, (Texas, 281-348-2572, www.chrisbebel.com);
— Timothy Dennin, a former Securities and Exchange Commission Division of Enforcement attorney and former assistant district attorney, (New York, 212-826-1500, www.denninlaw.com);
— Thomas Mauriello, an investor rights attorney who represents investors throughout the United States, (California, 888-612-1961, www.maurlaw.com);
— Howard Prossnitz, an investor rights attorney who represents investors throughout the United States (Illinois, 312-960-1800, www.prossnitzlaw.com);
— Thomas Shine, a former Securities and Exchange Commission Division of Enforcement attorney (Florida, 321-724-4445, www.thomasfshinelaw.com);
— Christopher Vernon, an investor rights attorney who represents investors throughout the United States (Florida, 239-649-5390, www.vernonhealy.com); 

Lehman Notes investigation: Vernon Healy law firm files first arbitration claim against UBS on behalf of investor who bought Lehman Notes sold by UBS

Naples, Florida — UBS committed gross misconduct when it compared “principal protected” Lehman Brothers notes to ultra-safe certificates of deposit and assured a Naples investor that Lehman notes had a “guarantee” to repay all of her principal amount according to a claim filed today on behalf of a Naples woman.  It now appears that she will suffer a loss well in excess of $100,000 of her principal investment in these structured notes that UBS described as principal protected.  

“When an issuer goes bankrupt, as Lehman Brothers did, holders of structured notes are left standing at the back of the line with the other unsecured creditors and may recover little, if anything, of their original investment,” the claim filed today by the Vernon Healy law firm states.

The investor, a single parent and elementary school teacher, sought safety for the limited funds she had received as an inheritance. 

Her UBS broker concentrated almost all of her investments — 95 percent of her account — in complex structured products, with all of those from a single industry sector, the financial industry. The broker assured her that her portfolio was diversified because the structured products were tied to various indexes, including the S&P 500.

While the indexes to which the products were tied may have had some diversification, the risk of repayment of the notes was heavily concentrated in a single industry — the financial industry — and much of that concentration was in a single company — Lehman. 

“The extreme concentration of this investor’s account in unsuitable, complex loan option products, coupled with the failure to adequately explain the nature of the securities or to disclose their risks to her, was especially egregious,” securities attorney Susan Healy said.

Major brokerage firms, including UBS (UBS), Merrill Lynch (MER), Barclays (BCS) and Wachovia (WB) sold principal protected notes in recent years and pushed their sales forces to dump these products on their own retail customers as they came off the underwriting assembly line, said securities attorney Chris Vernon.

Through formal claims, the Vernon Healy law firm intends to show that conflicts of interest led UBS to misrepresent and inappropriately recommend Lehman notes and other structured notes to a wide variety of its trusting base of retail clients.  

According to Bloomberg, investors held more than $8 billion in Lehman structured notes as of September, with $2.8 billion of those sold in 2008.

As early as 2005, industry regulators from the Financial Industry Regulatory Authority (formerly known as the NASD) raised concerns about misrepresentations regarding the safety and complexity of principal protected notes and other “structured products.”