As a solo practitioner, one of the most difficult things to do is find enough time for everything in and outside of my practice. Unfortunately, blogging is one of the things that is easiest to “put off.” Although services like Twitter, Delicious, LinkedIn, etc. provide me (and other practitioners) with options to communicate other than blogging, they have their shortcomings. These services offer the convenience of sharing thoughts, ideas, etc., without spending a significant amount time – a great benefit to solo professionals. However, they are not full substitutes for blogging.

Personally, while I have had difficulty finding time to blog over the past few months, I have continued to post to Twitter and Delicious. Even I incorrectly justified this activity as a substitute for blogging. Unlike these other services, a blog provides an outlet for communicating to an audience in a personal way and without the limitation of 140 characters. Additionally, this can be a great outlet for escaping, at least temporarily, the rigors of the everyday practice of law.

If you follow my blog, I encourage you to follow me on Twitter and Delicious. Someday soon, I will figure out a way to integrate my activity on these (and other) services with my blog. If anyone has any ideas for doing so, please send me an email.

In conclusion, I apologize to everyone who follows my blog for my lack of recent updates. However, I making a commitment to writing a minimum of one blog post per week going forward and look forward to your continued following.

Have a wonderful weekend!

In addition, FINRA has also noted a significant increase in the number of cases in mediation. Through January 31, 2010, parties in 75 cases had agreed to mediation, which is 92% greater than the number of cases (39) under a mediation agreement in through January 2009. Cases in mediation were closed in approximately 121 days.

The most frequent securities and investment claims/controversies involved in arbitration continue to be breach of fiduciary duty, misrepresentation/fraud, negligence, failure to supervise, oission of facts, and breach of contract. Mutual funds and common stock also remain the most common type of securities involved in arbitration claims.

During the month of January, 350 cases closed. Of those, 52 were decided by arbitrators (39 closed as the result of an arbitration hearing and 13 closed after an arbitrator reviewed documents submitted by the parties) and the remainder were closed as the result of settlement, withdrawn claims, and “other reasons.” Investors also won fewer cases, as a percentage of cases decided by arbitrators, than in the previous year as only 41% of investors who were seeking monetary damages were awarded any compensation. This is down from 45% in 2009.

The Kueser Law Firm represents investors in securities arbitration. If you feel that your investments have been mismanaged, please contact our firm to discuss your rights. This entry was originally posted on the firm’s Securities Arbitration Blawg.

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Despite the repeated warnings issued by FINRA and the SEC as to the tremendous risk presented by leveraged ETFs, it appears that these fund families are forging “full steam ahead.” The announcement from Direxion comes only weeks after its rival, ProShares, released eight additional leveraged ETFs. Four of the new ProShares funds seek to obtain returns equal to 300% of the daily return of the Nasdaq 100, Dow Jones Industrial Average, Standard & Poors 400 Index, and the Russell 2000 Index. The other four funds seek returns equal to 300% of the inverse daily return of these same indices (again, investors in these funds profit when the value of the respective index declines).

Leveraged ETFs invest their shareholders’ money in futures and/or derivatives in order to multiply the daily return of an index. Some leveraged ETFs seek a return that is 200% or even 300% of the daily performance of the index. Inverse ETFs work in much the same way, except that these funds seek a return that is equal to 100%, 200%, or even 300% of the opposite of the daily performance of the index. With these funds, an investor actually profits when the index declines in value. Typical leveraged ETFs and inverse ETFs reset each day and therefore, over periods longer than one day, their performance can vary considerably from the index.

Leveraged ETFs may be appropriate investments for professional asset managers and highly sophisticated investors; however, in this author’s opinion, leveraged ETFs are inappropriate for the vast majority of individual investors. Given the level of volatility in the stock markets in recent times, leveraged ETFs expose investors to tremendous potential for loss in a short period of time. Furthermore, in various instances in the retail setting, leveraged ETFs have been sold to investors without full disclosures related to these risks.

The Kueser Law Firm represents investors who have lost money in leveraged ETFs. If you are concerned that your investments have been mismanaged, contact us to learn more about your rights. This entry was originally posted on the firm’s Investment Fraud Blawg, Securities Fraud Blawg, and Stockbroker Fraud Blawg.

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FINRA recently reported its December 2009 arbitration statistics. For the year ended December 31, 2009, 7,137 claims had been filed. This represents an increase of 43% as compared to the number of cases filed in 2008 (4,982). The average turnaround time for cases that go to an arbitration hearing has declined by 11% (14 months from 15.7 months).

The most frequent securities and investment claims/controversies involved in arbitration continue to be breach of fiduciary duty, misrepresentation/fraud, negligence, and breach of contract. Mutual funds and common stock also remain the most common type of securities involved in arbitration claims.

Investors have also prevailed in a larger percentage of cases decided (by hearing or on the papers). For the year, 669 cases had been decided and investors prevailed in 304 (45%) of those cases. This does not include cases that settled in favor of the investor, which FINRA notes to approximately 25%.

The Kueser Law Firm represents investors in securities arbitration. If you feel that your investments have been mismanaged, please contact our firm to discuss your rights.

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The most frequent securities and investment claims/controversies involved in arbitration continue to be breach of fiduciary duty, misrepresentation/fraud, negligence, and breach of contract. Mutual funds and common stock also remain the most common type of securities involved in arbitration claims.

Investors have also prevailed in a larger percentage of cases decided (by hearing or on the papers). As of October 31, 2009, 516 cases had been decided and investors prevailed in 236 (46%) of those cases. This does not include cases that settled in favor of the investor.

The Kueser Law Firm represents investors in securities arbitration. If you feel that your investments have been mismanaged, please contact our firm to discuss your rights.

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FINRA recently reported its September 2009 arbitration statistics. As of September 30, 2009, 5,545 claims were filed, compared to only 3,471 as of September 30, 2008, an increase of 60%. FINRA also reported that 3,196 cases were closed through September and that the average turnaround time for cases that go to an arbitration hearing has declined by 9% (14.5 months from 16.0 months).

The most frequent claims/controversies involved continue to be breach of fiduciary duty, misrepresentation/fraud, negligence, and breach of contract. Mutual funds and common stock also remain the most common type of securities involved in arbitration claims.

Investors have also prevailed in a larger percentage of cases decided (by hearing or on the papers). As of September 30, 2009, 444 cases had been decided and investors prevailed in 203 (46%) of those cases. This represents a 1% increase over last month and continues to demonstrate that arbitration results are moving more in favor of investors/Claimants. Given that 3,196 cases have closed as of September 30, 2009, these statistics also demonstrate that a large number of arbitration claims are settled.

The Kueser Law Firm represents investors in securities arbitration. If you feel that your investments have been mismanaged, please contact our firm to discuss your rights.

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To accomplish this, FINRA has expanded the program to include cases against the following 14 broker-dealers (from 11 broker-dealers):

• Chase Investment Services (10 cases);
• Oppenheimer & Co. (15 cases);
• Raymond James Financial Services/Raymond James & Associates (10 cases);
• Citigroup Global Markets (60 cases);
• Merrill Lynch (60 cases);
• Morgan Stanley Smith Barney (60 cases);
• UBS Financial Services (60 cases);
• Wells Fargo Advisors (60 cases);
• Ameriprise Financial Services (18 cases);
• Charles Schwab (10 cases);
• Edward Jones (18 cases);
• Fidelity Brokerage Services (10 cases);
• LPL Financial (10 cases); and
• TD Ameritrade (10 cases)

The investor who files the claim has the option having their claim participate in the program, which concludes on October 5, 2010.

FINRA is using the program to evaluate a number of factors, including the results of cases decided by all public arbitration panels, as well as the number of investors who elect to have their case participate in the program. To date, FINRA reports that investors have filed 474 eligible cases and that 51% of investors in those cases have elected to participate in the program.

The Kueser Law Firm represents investors in securities arbitration. If you feel that your investments have been mismanaged or if you have general questions about your mutual funds, stocks, bonds, or other investments, please contact our firm to discuss your rights.

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The Fund is different from most exchangetraded funds in that it seeks leveraged returns and only on a daily basis. The Fund also is riskier than similarly benchmarked exchange-traded funds that do not use leverage. Accordingly, the Fund may not be suitable for all investors and should be used only by knowledgeable investors who understand the potential consequences of seeking daily leveraged investment results. Shareholders should actively monitor their investments.

(See, e.g., prospectus at pp. 49, 54, 59, 64, 69, 74, 79.)

While additional disclosures are an improvement, this disclosure is still somewhat vague. It is similar to telling someone that an investment is suitable for them if they are seeking growth of their investment. Who isn’t seeking growth of their investments? I have never heard anyone say “I am looking for an investment that will cause me to lose money.”

In addition, many investors who are sold leveraged ETFs such as these never receive a copy of the prospectus. If an investor does not receive the prospectus, the disclosure does not protect them (however, it could protect the fund company from liability).

Leveraged ETFs invest their shareholders’ money in futures and/or derivatives in order to multiply the daily return of an index. Some leveraged ETFs seek a return that is 200% or even 300% of the daily performance of the index. Inverse ETFs work in much the same way, except that these funds seek a return that is equal to 100%, 200%, or even 300% of the opposite of the daily performance of the index. With these funds, an investor actually profits when the index declines in value. Typical leveraged ETFs and inverse ETFs reset each day and therefore, over periods longer than one day, their performance can vary considerably from the index. In addition to ProFunds, the most popular leveraged ETFs and inverse ETFs are managed by Rydex and Direxion.

FINRA has already declared that leveraged ETFs are typically unsuitable for retail investors. Therefore, the announcement by ProFunds is not a revelation. If your stockbroker or financial advisor has sold you any leveraged ETFs or inverse ETFs, or purchased any leveraged ETFs or inverse ETFs in your accounts, you may be entitled to recover any losses on these investments. The Kueser Law Firm represents investors who were sold leveraged ETFs and inverse ETFs. If you are concerned that your investments have been mismanaged, contact us to learn more about your rights.

This post is also available on our Investment Fraud Blawg, Securities Fraud Blawg, and Stockbroker Fraud Blawg.

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Stifel Nicolaus falsely represented auction rate securities as liquid, short-term investments to Colorado investors without discussing the risks. These representations gave investors a false sense of security that the investments would always be liquid when auction rate securities, in fact, faced significant, inherent liquidity risks.

A copy of the Notice of Charges is available in pdf format here.

Auction rate securities, which are also referred to as auction rate preferred shares, ARS, ARPS, and MARS, to name a few, have been at the epicenter of regulatory investigations across the country. Auction rate securities are long-term (or perpetual) investments that traded in periodic “auctions.” They are designed to allow companies, mutual funds, municipalities, and other organizations to borrow money for a long-term period while paying short-term rates of interest, which were reset during the periodic auctions. It was in these auctions that investors who held the securities could also sell their holdings if they needed to have access to cash. Because these auctions occurred on a relatively frequent basis (i.e., weekly, bi-weekly, or monthly), investors had the ability to sell their positions and obtain cash in a relatively short period of time.

For years, Wall Street firms sold auction rate securities as short-term, cash equivalent investments that paid marginally higher rates of interest as compared to other short-term investments. What these firms did not tell their customers was that the liquidity of the auction rate securities markets was entirely dependent on the ability and willingness of these same firms to participate in the auctions — in other words, these firms had to be willing and able to purchase the securities that were not purchased by the other auction market participants. In most cases, these firms were purchasing more securities than the other market participants. The firms (and their representatives) did not disclose these critical facts, but rather, only disclosed that the interest rates paid on the securities was reset at the auctions. In addition, these firms generally failed to inform investors that they would not be able to access their invested capital if the auctions froze.

In 2007, these Wall Street firms came under massive liquidity problems. As a result, these firms made a decision to cease participation in the auction rate markets, leaving investors across the country with illiquid investments that typically paid short-term rates of interest. In some cases, the auction rate securities paid no interest for months at a time. Therefore, investors were left holding a bag of illiquid long-term securities that paid little, if any interest.

Several class actions have been filed across the country on behalf of auction rate securities investors. In addition, numerous securities arbitration claims have been filed by investors. Some of these cases, as well as action by state regulators, has resulted in redemption of some investors’ auction rate securities. However, many investors remain stuck with these illiquid investments.

If you own auction rate securities that have not been redeemed, you may want to contact an attorney to discuss your rights. The Kueser Law Firm is a boutique legal practice that focuses its practice on protecting the rights of investors and recovering investment losses for companies and individuals. You may contact us by completing the form to the right, or by visiting our website.

This post is also available on our Investment Fraud Blawg, Securities Fraud Blawg, and Stockbroker Fraud Blawg.

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“A nation that forgets its past is doomed to repeat it.” — Winston Churchill

On Wednesday, September 23, 2009, several major media outlets published articles discussing the Obama administration’s continued efforts to enact enhanced regulatory reform over the financial markets.

Given what has occurred over the past two years, enhanced regulation is absolutely necessary. As Paul Krugman noted in a New York Times Op-Ed article: “In the grim period that followed Lehman [Brothers'] failure, it seemed inconceivable that bankers would, just a few months later, be going right back to the practices that brought the world’s financial system to the edge of collapse.” However, that is exactly what is happening. While the rest of America continues to struggle with job losses, foreclosures, and the effect that the downturn had on their investment portfolios, Wall Street is again promoting the very investments that caused the problem — and business appears to be good.

For example, in a recent article on Bloomberg.com, Abigail Moses and Shannon D. Harrington stated that “A year after the bankruptcy of Lehman Brothers Holdings Inc., credit-default swaps have lost their stigma for disaster and are contributing to the growing confidence in the credit markets.” Have we already forgotten Lehman Brothers and AIG and the problems that CDS created? It appears that we have. In a recent article, Greg Burns of the Chicago Tribune noted that credit default swap reform has “fizzled.”

The only reason that all this appears to have been forgotten is due to the recent “recovery” in the stock market. As Treasury Secretary Timothy Geithner stated yesterday in his remarks before Congress:

Make no mistake, the flaws in our financial system and regulatory framework that allowed this crisis to occur, and in many ways helped cause it, are still in place . . . . We may disagree over details over how to best fix those flaws, but that cannot mean we do not act.

It seems to me that the Treasury Secretary is someone we should be listening to, and not Wall Street or others with a similar agenda. Let us not forget our past.

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