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Tuesday, April 15, 2014

I Discuss With Investment News Today Puerto Rico Bond Fund Fraud Developments

And how burned victims with securities fraud claims against UBS will be impacted.  The entire story, and my analysis, can be viewed at the link below.

I Discuss The UBS Puerto Rico FINRA Developments With Reuters...

today.  The entire story, and my analysis of the developments, can be found in the link below.  FINRA has now agreed to lift the stay and proceed with the FINRA arbitration cases filed against Merrill Lynch and UBS for the closed end fund Puerto Rico cases.  FINRA disclosed it is furiously recruiting additional arbitrators to adjudicate these cases.  Unfortunately, it is still likely given the 1000 plus cases to be filed against Merrill Lynch and UBS there will be delays in the resolution of the claims and lawsuits against these firms given FINRA's refusal to allow cases to be heard in South East FINRA hearing locations.

Monday, April 14, 2014

Crucial Update for UBS Bond Fund Clients: FINRA Makes Decision on Venue and Arbitrators

Today FINRA issued its procedural ruling on cases for people who have filed or are planning to file FINRA arbitration claims for bond fund losses recommended by Merrill Lynch and UBS.  The entire decision is cut and pasted below.  FINRA decided the cases must be adjudicated in Puerto Rico for burned investors from Puerto Rico who dont have residences in other areas of the U.S. FINRA also decided to exapnd the arbitrator pool to include arbitrators from the South East U.S. FINRA region.  Unfortunately, FINRA did not allow Puerto Rican residents to have their cases decided in the U.S.  This will likely lead to delays as many FINRA arbitrators will NOT be willing to travel to Puerto Rico more than one time a year.  As part of the release, FINRA also disclosed UBS and Merrill Lynch agreed to pay the costs of translation services at the actual arbitration hearing. Please contact us for a detailed description as to how this will impact FINRA arbitration hearing for burned clients.


Over the past several months, FINRA has received an influx of arbitration case filings relating to Puerto Rico bonds from Claimants, almost all of whom reside in Puerto Rico. As of April 7, 2014, FINRA has received approximately 209 cases involving Puerto Rican municipal securities. FINRA staff has had numerous conversations and communications with counsel for Claimants and Respondents, including an in-person meeting, concerning administration of these cases. In particular, the conversations focused on venue and expansion of the available pool of arbitrators in Puerto Rico. After considerable deliberation, FINRA has determined to issue the following guidance for the administration of these cases.

Guidance for Puerto Rico Bond Cases

Venue: FINRA will determine venue in the Puerto Rico bond cases in accordance with Rule 12213 of the Customer Code of Arbitration Procedure (the "Code") which states in relevant part that "the Director will select the hearing location closest to the customer's residence at the time of the events giving rise to the dispute . . . ." FINRA cases generally are venued where the customer resides, the transactions took place, and the witnesses are located. These criteria all point to Puerto Rico as the appropriate venue. Accordingly, FINRA will not modify its existing venue rule and procedures absent the agreement of the parties. Specifically, FINRA will follow Rule 12213 in assigning venue for the following reasons:
  • FINRA's longstanding rule and policies, which were codified in 2007, were designed for the convenience and protection of customers;
  • The solicitations and transactions in these cases took place in Puerto Rico;
  • Many Claimants in these cases are elderly and travel to the continental United States would be difficult, burdensome and expensive;
  • Many Claimants' attorneys are located in Puerto Rico and requested venue in Puerto Rico. As of April 7, 2014, approximately 62 out of 209 Claimants are represented by Puerto Rican counsel;
  • As of April 7, 2014, Claimants named individual associated person Respondents in approximately 50 of the 209 cases. Most individual associated person Respondents are located in Puerto Rico;
  • Almost all potential witnesses are located in Puerto Rico, including non-party witnesses;
  • Compelling non-party witnesses located in Puerto Rico to testify at arbitrations in the continental United States may be difficult;
  • The total expenses, including Claimant and witness travel, of requiring individuals from Puerto Rico to travel to the United States would be substantial.
FINRA will continue to allow customers with more than one residence to choose venue based on the location of any of their residences. Further, if all parties in an arbitration case agree in writing to a hearing location other than one based on the customer's residence, FINRA will select that hearing venue. 

Arbitrator Pools: FINRA will initially provide arbitrators for the cases venued in Puerto Rico from Puerto Rico and from other hearing locations within the Southeast Region and Texas. Counsel for Claimants and Respondents were in agreement that this was the area from which to seek arbitrators to expand the available roster in Puerto Rico. FINRA has expanded the available pool of arbitrators to serve in Puerto Rico from these states and FINRA will pay their travel expenses. To date, over 600 currently eligible arbitrators on the FINRA roster have agreed to serve in Puerto Rico. FINRA continues to expand the available pool of Puerto Rico arbitrators willing to serve. Additionally, FINRA is actively recruiting and training arbitrators who reside in Puerto Rico on an expedited basis. As a reminder, parties retain the option to agree to modify the provisions of Rule 12401 to have a sole public arbitrator decide their case, as opposed to a three arbitrator panel, even in cases in which the amount in controversy exceeds $100,000.00. 

Interpreter Services: FINRA arbitration hearings generally are conducted in English. However, FINRA recognizes that Spanish is the primary language in Puerto Rico and that many Claimants are not conversant in English. Therefore, at FINRA's request, UBS and Merrill Lynch have agreed to bear the costs of consecutive translation services in the Puerto Rico bond cases venued in Puerto Rico in which either is a named Respondent. FINRA is in discussions with other named Respondents to obtain their agreement to bear the cost of translation services. Customer-Claimants should make arrangements directly with UBS and Merrill Lynch's counsel regarding translation services. FINRA is in the process of translating the Customer Code of Arbitration and the Code for Mediation into Spanish. The Codes will be available on FINRA's website at the beginning of May 2014. 

Service of Arbitrators: Counsel for Claimants and Respondents have agreed that FINRA should not limit the service of arbitrators who have previously served on a case involving Puerto Rico bonds through Award. Parties, of course, have available to them the FINRA rules on causal challenges and the Director's authority to remove an arbitrator as set forth in Rule 12407. 

Costs of Witnesses: Witness costs will be minimized by setting venue in Puerto Rico, where almost all of the likely witnesses are located. Therefore, FINRA will follow its existing rules concerning witness costs. 

Disclosures: The arbitrators will be asked to answer an agreed upon set of disclosure questions submitted by the parties as part of the list selection process in order to alert the parties to possible conflicts. Please also note that any party may request additional information from an arbitrator whose name appears on the arbitrator ranking form. If a party requests additional information about an arbitrator, FINRA will request the additional information from the arbitrator, and will send any response to all of the parties at the same time.    

In Sunday's Chicago Tribune I Penned An Article...  

Tuesday, April 08, 2014

Suing Berthel Fischer For Investment Losses in Alternative Investments

Good news for investor clients of Berthel Fisher who sustained investment losses in the firm's alternative investments in the last few years.  The firm and its affiliate, Securities Management & Research, Inc., of Marion, Iowa, were fined $775,000 by its main regulator, FINRA Enforcement, for various practices related to the sale of alternative investments.  FINRA found that from January 2008 to December 2012, Berthel Fisher had "inadequate supervisory systems and written procedures for sales of alternative investments such as non-traded REITs, managed futures, oil and gas programs, equipment leasing programs and business development companies. In some instances, the firm failed to accurately calculate concentration levels for alternative investments, thus, the firm did not correctly enforce suitability standards for a number of the sales of these investments. Berthel Fisher also failed to train its staff on individual state suitability standards, which is part of the suitability review for certain alternative investment sales.

This enforcement action will assist clients with finra arbitration claims or lawsuits against the firm OR clients who wish to sue the firm.  In virtually every case, suitability and supervision issues come into play.  Especially in overconcentration cases, what the firm did in order to ensure the exchange traded fund, stock, bond or other investment was appropriate for clients is a crucial, important step firms must take.  If the investment was unsuitable, the client might be able to get some, or all, of their investment losses back.

To learn about all legal options against Berther Fischer, please call our investment fraud legal team in Chicago for a no cost review.

UBS Rocked With Punitive Damage Award

This week UBS Wealth Management Americas was rocked with a massive, $1 million punitive damage award.   The Claimant was also awarded $4.4 million in damages and attorney fees.  The arbitration panel found UBS "deliberately prevented the distribution of material information" and continued to recommend the investment despite clear evidence of the investments rapid decline.  Sound familiar? We have alleged in our FINRA arbitration claims against UBS for the sale of Puerto Rico closed end bond funds the advisers failed to keep our clients informed and prevented them for receiving real information about the deteriorating condition of Puerto Rico's finances.  While this massive punitive damage award case did not involve the Puerto Rico bond funds, many of the same issues, including the lack of supervision of UBS employees, will come into play in the lawsuits and FINRA claims against UBS for its dealings in these funds. To receive a free review of your case against UBS by an attorney, please call us or visit

Lawsuits for Franklin Double Tax Free Income Fund (FPRTX)

Did you lose money with the Franklin Double Tax Free Income (FPRTX) Fund?  If so, those losses can potentially be recovered in the FINRA arbitration claims process. Financial advisers recommended large sums of the Franklin Double Tax Free Income Fund to retail investors. Unfortunately, a massive bet in Puerto Rico debt for FPRTX caused large losses for the elderly and conservative investors in the fund.

The securities attorneys of The White Law Group may be able to help you recover your losses by filing a FINRA Dispute Resolution claim against the brokerage firm that sold you the investment. According to Bloomberg, "Franklin Double Tax-Free Income Fund is an open-end fund incorporated in the USA. The Fund's objective is to provide investors with as high a level of income exempt from federal income taxes as is consistent with prudent investment management. The Fund invests mainly in investment grade municipal securities that pay interest free from personal income taxes of a majority of states." 

See more at:

Suing LPL for Investment Losses In Alternative Investments

We are currently representing clients of LPL in the FINRA arbitration claims process who purchased alternative investments and sustained significant losses.  LPL Financial was recently sanctioned for its sales of alternative investments.   The Massachusetts Securities Division fined LPL Financial $500,000 and ordered LPL to pay $2 million in restitution for selling non-traded REITs to customers that were not qualified pursuant to Massachusetts' heightened prospectus, net worth, annual income requirements and concentration limits for alternative investments.  

FINRA then investigated LPL supervision and sales practices for alternative investments. On March 24, 2014 LPL entered into an Acceptance, Waiver, and Consent with FINRA.  LPL was fined $950,000 and ordered to review the adequacy of its supervision and compliance over alternative investments, and improve their system. FINRA specifically made the following findings:

Between January 1, 2008 and July 1, 2010, the Firm violated NASD Rule 3010(a) and 3010(b), NASD Rule 2110 and FINRA Rule 2010 by failing to implement an adequate supervisory system for the sale of alternative investments that was reasonably designed to achieve compliance with NASD Rule 2310, and state suitability requirements. Specifically, the Firm failed to have a reasonable supervisory system and procedures to identify whether purchases of [alternative investments] caused a customer's account to be unsuitably concentrated in Alternative Investments in contravention of LPL, prospectus or certain state suitability standards. In addition, the Firm did not adequately train its supervisory staff to appropriately analyze state suitability standards as part of their suitability review of certain Alternative Investment transactions. As a result of these supervisory deficiencies, between January 1, 2008 and July 1, 2012, a sampling of REIT transactions revealed that LPL approved 106 Alternative Investment transactions in contravention of Firm, prospectus or state suitability standards.

Our clients with FINRA claims pending purchased LEAF Equipment Finance Fund 4.  LEAF 4 is purported to be an investment in Equipment Leasing.  According to the Prospectus, it "provides investors with access to equipment leases and loans to businesses that usually are made by large financial institutions and banks." We have alleged0 LPL financial advisors did not diligently analyze whether this investment was suitable for the investors.  On the front page of the Prospectus, LEAF 4 warned that the investment "involves a high degree of risk" and that it is only suitable for investors who could "afford a complete loss of your investment."  LEAF 4 disclosed in the prospectus that its distributions were not guaranteed.
In addition, LEAF 4 had substantial fees and expenses.  Our clients were charged approximately 18% of their investment in fees, which were primarily paid to the general partner, LEAF Asset Management.  Moreover, this is an illiquid investment, and investors cannot get their money out of this until at least 2018. 

LEAF 4's monthly dividends have also been dramatically cut. The dividends started out at a 8.5% distribution. However, only one year after investing, LEAF 4 cut our clients distributions in more than half, lowering it to 4% in August 2010. On February 12, 2014, LEAF notified clients by March 2014 the dividend would be cut to 3% and that "further reductions in future distributions are expected."  The investment in LEAF has turned out to be disastrous for most investors.

We are also suing Linsco for sales of KBS REIT I.  The share price of KBS REIT I has dropped dramatically in a short time period. In an Investment News article by Bruce Kelly dated March 30, 2012 the precipitous drop in KBS's share price is detailed and discloses the suspension of distributions.  According to a letter from KBS sent on January 6, 2014, KBS REIT I has been revalued at $4.45 per share. Further, according to public filings made with the Securities and Exchange Commission the REIT has suspended both redemptions and distributions as of March 20, 2012. The most recent tender offer on KBS REIT I was for $4 per share in November 2011. Thus, investor funds are trapped and what is worse, there will be no return on this investment.  Further, there are virtually no secondary market bids for KBS REIT shares.

If you invested in LPL recommended alternative investments like KBS REIT I, LEAF 4 please call us for a no cost review as to whether these losses can be recovered on a contingency fee basis through a FINRA arbitration claim or lawsuit. 

Monday, April 07, 2014

The Devestating Impact of UBS Bond Fund Losses

The finances of many residents of Puerto Rico were devastated by the losses that took place in UBS closed end Puerto Rico bond funds.  Many retirees, near retirees and other conservative clients sustained massive losses in mutual funds that were pitched as conservative or at least less volatile than the stock market.  The New York Post recently profiled the case of a Harlem educator who lost $400,000 in the UBS Puerto Rico funds.  Vivian Falto alleges in a FINRA arbitration claim her life has been turned into a "financial hell" and she was promised the bonds were "secure and there was no risk." Sound familiar? Unfortunately, these sorts of representations were made to most of our clients who are now suing UBS for Puerto Rico related investment losses.  The impact of these losses have proven too much for some investors to handle.  Fortunately, despite the recent freeze on UBS related Puerto Rico FIRNA cases, investors with securities fraud claims against UBS and Merrill Lynch can attempt to recoup those losses through the FINRA arbitration process.  To learn more please see       

Delays For Puerto Rico UBS and Merrill Lynch Victims In Resolving Their Case

In Investment News this week, I discuss the potential delays victims of UBS and Merrill Lynch who are contemplating filing FINRA arbitration claims against the firms might face.  The entire story can be viewed at the link below.  Since FIRNA only has 9 arbitrators in San Juan, we have been advocating for FINRA to open up the pool of arbitrators to the south east region of the U.S. and give burned investors a choice on where they want their cases to be decided.  FINRA is currently contemplating these requests and is expected to make a decision this week.