The panic of 2008, continued stock market volatility and the problem of how to reduce debt and close deficits have flattened investor confidence in the stock market, and, consequently, traditional asset allocation models. What was traditionally viewed as a balanced portfolio – 60% stocks and 40% bonds – is now viewed by some as high risk. (more…)
Some of the typical risks and problems associated with alternative investments are risk of loss of principal, excessive fees, lack of transparency, illiquidity, and high correlation with asset classes (like stocks) that they purportedly hedge.
That is not investing; it is speculation.
Investors are reportedly beginning to shun exotic and niche exchange traded funds. That has spurred sellers to market them more aggressively, because many of the more than 200 exchange traded funds launched in the past year are exotic and niche ETFs. Those who recommend them are trying to capitalize on investors’ worst instincts. (more…)
Conflicting interests are not just a by-product of Wall Street’s business, they are the very essence of it.
The Financial Industry Regulatory Authority (FINRA) is reportedly interested in examining the conflicting interests that its member firms have with their customers. (more…)
Investors are either not being told about the risks or not fully appreciating the risks.
Many fixed income investors, desperate for yield, are putting their hard-earned savings in bond funds that offer attractive total returns and yields but carry significant risk. Virtually all the experts observe that both the corporate and municipal bond markets are in a bubble that will inevitably burst and destroy many investors’ savings. The SEC has stepped up efforts to educate investors about the perils of bonds and bond funds, which have traditionally been regarded as relatively low risk. The clear message is: that is no longer the case. (more…)
Hedge fund managers blamed the poor performance on a “too cautious” approach
The Wall Street Journal reports that hedge funds gained 5.5% on average in 2012 while the S&P 500 stock index gained 16% – (more…)
U.S. District Judge Linda Reade calculated that when BLP collapsed, 111 investors were owed roughly $56 million
According to a recent article written by Courthouse News Service, Martin Sigillito of St. Louis, an attorney and an American Anglican bishop, has been sentenced to 40 years in prison. He is said to have devised the largest Ponzi scheme in local history. (more…)
Should this type of elaborately planned financial dishonesty be tolerated by FINRA?
The Financial Industry Regulatory Authority apparently tolerates certain instances of clear and unequivocal dishonesty by brokers. While the harm to investors that flows from that dishonesty may vary from Madoff magnitude to nothing, dishonesty – when it is irrefutable – should not be tolerated by an industry that holds itself out as trusted professional financial advisors. Yet it is tolerated. (more…)
“”U.S. retail investors lack basic financial literacy … have a weak grasp of elementary financial concepts and lack critical knowledge of ways to avoid investment fraud.”
A recent study by the SEC concluded that most investors understand very little about the financial investments they buy. Following the financial crisis, Congress suspected that the financial illiteracy of investors played a role in the crisis and directed the SEC to conduct a study on the subject. The SEC has completed its study and issued its report; the findings are indeed shocking. (more…)
This is essentially a market-timing strategy that is flawed in the sense that no one is a reliable market timer.
Research firm Cerulli Associates reports that adviser-run mutual fund wrap-fee programs underperformed benchmarks significantly in 2010 and 2011. Many investment managers, like many investors, move money out of the market when markets decline, and miss out on the rebound. This is essentially a market-timing strategy that is flawed in the sense that no one is a reliable market timer. (more…)
The SEC has filed a Complaint against Miami entrepreneur Claudio Osorio for allegedly misrepresenting the success of his company
The SEC has filed a Complaint against Miami entrepreneur Claudio Osorio for allegedly misrepresenting the success of his company between 2007 and 2010. Osorio claimed to be able to produce housing materials that would withstand natural disasters. He is said to have stolen almost half of the money raised to pay for his lavish lifestyle. As reported, (more…)
It is important to keep an eye on suspicious activities when it comes to your relatives. Sometimes the people who we expect to catch fraud are unable or unwilling to report it.
A recent Consumer Reports article entitled “Protecting Mom & Dad’s Money” gave readers some great insights on what to do when you suspect financial abuse. In the past they have touched on scams by strangers, but they write, (more…)
Regardless of whether you believe gold actually is a good investment or not, the question is “what can you do if you or your family member have already bought gold or silver coins, and are now looking to make sure it wasn’t a scam?”
Coin fraud has been around for ages and continues to capture more victims every year. You may have seen commercials or advertisements that spout the benefits of buying gold and silver coins as an investment strategy. Potential investors are told that these precious metals have always been around and will always be a valuable investment since the price goes up over time. Regardless of whether you believe gold actually is a good investment or not, the question is “what can you do if you or your family member have already bought gold or silver coins, and are now looking to make sure it wasn’t a scam?” Here are a few tips on testing a coins authenticity.
Securities and Exchange Commission has charged Jim Donnan, a former Georgia football coach, for violating federal securities laws by recruiting high profile coaches and players to invest millions.
CBSAtlanta.com recently published an article entitled “Hall of Fame coach Jim Donnan accused in Ponzi Scheme”, in which it reports that the Securities and Exchange Commission has charged Jim Donnan, a former Georgia football coach, for violating federal securities laws by recruiting high profile coaches and players to invest millions.
As long as trading scandals continue to plague the industry, Wall Street will not be trusted and should not be trusted, Mr. Gorman essentially told his fellows.
Wall Street’s reputation is in the doghouse, lamented Morgan Stanley CEO James Gorman, who was addressing an industry conference in New York. Some observers (Bloomberg columnist William D. Cohan for instance) and members of the public believe it should be in the jailhouse. Financial services and banking are the least-trusted industries, according to Bloomberg, citing a survey by Edelman Public Relations that was released earlier this year (“Wall Street’s Reputation Remains in Doghouse, Gorman Says,” Bloomberg). (more…)
One thinks, how could someone so good looking and so confident in what he or she is selling be a scam artist! That is exactly what they want others to think.
In the October/November 2012 issue of AARP magazine, a featured article ran entitled “Confessions of a Con Artist.” In this article Jim writes about his years of conning people out of money, how he got there, and how it wasn’t until the FBI busted into his boiler room operations in 2004 that he realized what he was doing was beyond wrong, it was really bad.
The U.S. Government Accountability Office (GAO) has issued a report warning about insurance agents, financial planners and attorneys who are taking advantage of elderly and low-income veterans by selling them deferred annuities and trusts on the pretext of helping them stay below the income threshold needed to qualify for pension benefits from the Department of [...]
The U.S. Government Accountability Office (GAO) has issued a report warning about insurance agents, financial planners and attorneys who are taking advantage of elderly and low-income veterans by selling them deferred annuities and trusts on the pretext of helping them stay below the income threshold needed to qualify for pension benefits from the Department of Veterans Affairs. (more…)
Brokers Marek Leszczynski, Benjamin Chouchane, Gregory Reyftmann, and Henry Condron are charged with overcharging customers $18.7 million by secretly keeping some of the customer’s earnings through markups and markdowns.
We often tell you about scams that are happening that follow the ‘too good to be true’ axiom, but sometimes it’s harder to detect them. An October 5 press release by the Securities and Exchange Commission entitled “ SEC Charges Four Brokers With Defrauding Customers in $18.7 Million Scheme” details one such instance. (more…)
“[H]e named the program accordingly because “when people found out they’d been ripped off, they would buy a .44 Magnum and shoot themselves in the head.”
Another investment con and more personal tragedies that could have been prevented have occurred. This time the SEC has charged Geoffrey H. Lunn of Sheridan, Colorado with operating a $5.77 million investment scheme with marketing assistance from Darlene A. Bishop of Odessa, Texas, and Vincent G. Curry of Las Vegas. Lunn falsely told investors that he was vice president of a firm whose executives had connections to Dresdner Bank. The fictitious firm, Dresdner Financial, with a name similar to a Dresdner Bank, a legitimate bank, apparently gave Lunn an aura of credibility with investors. (more…)
These new crowd funding regulations will pave the way for anyone with a computer to sell very high-risk securities via the internet to anyone, anywhere, with limited financial disclosures.
The SEC recently issued new regulations permitting promoters to offer unregistered, illiquid securities to the general public for the first time. These new crowd funding regulations will pave the way for anyone with a computer to sell very high-risk securities via the internet to anyone, anywhere, with limited financial disclosures. (more…)
It will cause so much devastation in the months and years to come that it will make us forget Bernie Madoff.
I’ve been warning for the last several years about the tsunami of investment fraud currently sweeping around the globe. It’s already cost baby boomers, senior citizens, pension funds, college endowments, and other investors more than $100 billion and will cause so much devastation in the months and years to come that it will make us forget Bernie Madoff. Having warned you as best I can through this blog, speeches, and The Vigilant Investor, I’ve decided that the best place for me in this battle is back at the SEC, where I first caught the investor protection bug. On Monday I begin work as a Senior Trial Counsel in the SEC’s Atlanta Office. Knowing the caliber of people in that office as I do, I have never been so excited to start a job. I pray that those of you who have followed this blog and who have put yourselves through the training to become vigilant investors, will contact me when you discover an ongoing fraud. My new email address will be HuddlestonP@sec.gov. (more…)