January 14, 2014

Articles

Written by Stuart R. Berkowitz
  • Are Private Reits The Next BIG SHORT? “The Big Short”, Brad Pitt’s recent movie, tells the story of the recent financial crisis caused by the securitization of housing mortgages. The business practices of the financial industry,  which almost caused the world’s economy to crumble, remain in place today. Securities lawyers, like myself, have routinely warned about the over-marketing of tech stocks,variable annuities, TIC private ...
  • Marketing of Private Securities by Brokers Is A Persistent Problem Within the Brokerage Industry Much of our economic growth is created by entrepreneurs starting a business in the family kitchen. In order to grow virtually all new starts need investment capital. Venture capital can come from a variety of sources including venture capitalists and private equity firms. The average investor is normally excluded from investing in such start-ups. Sometimes, however, ...
  • IS MY BROKER RELATED TO BERNIE MADOFF? While Bernie Madoff’s tentacles did not extend to St. Louis, we did see St. Louis brokers sent to jail for stealing client money.  Madoff’s victims included sophisticated investors, foundations, investment firms and even universities.  The  cases involved brokers employed by some of the most respected brokerage houses in St. Louis. How can you protect yourself? It’s certainly ...
  • A FRAUDULENT TAX SHELTER – INVESTORS AVOID THIS SCAM! A recent tax scheme of a tax attorney in league with financial advisors and accountants has hurt several score of small businessmen in St. Louis.  The scheme was promoted nationwide by a handful of tax attorneys in league with financial advisors. The Scheme The tax shelter was called a PIRAC (Private IRA Corporation).  In its simple terms, a ...
  • WHEN A ‘RETIREMENT SPECIALIST’ OFFERS A FREE DINNER – RUN! At least once a week, I get a fancy looking invitation for a free dinner.  The sponsor usually paints himself as a ‘retirement specialist.”  He may say he is endorsed by a religious organization.  The invitation may include a free seminar on retirement planning. If you are a recipient of one of these invitations, you are ...
  • 5 REASONS WHY YOU SHOULD BE WARY OF VARIABLE ANNUITIES A variable annuity is an insurance product sold for investment purposes.  The insurance element is the death benefit which is payable only if you die at the time the variable annuity is still in effect.   To receive the death benefit you have to die- an event many investors do not appreciate!  The investment element is ...
  • ARE FINRA ARBITRATION PANELS FAIR? Let me first set the stage and describe how securities arbitration has evolved. In 1987 the Supreme Court ruled that customary brokerage customer agreements calling for arbitration of customer disputes were enforceable.  As a result most customer disputes went to the NASD (National Association of Securities Dealers).  Accordingly, if you have a dispute with your broker ...
  • IS SELLING AWAY THE SAME AS AN AFTER CHRISTMAS SALE? No.  But since I have your attention, “selling away” is one of the most pernicious and dangerous investment scams in the brokerage industry.  It is outlawed by FINRA and all state security regulators, yet it persists. First, let me explain “selling away” (the phrase used by the industry and regulators – not me).  “Selling away” is ...
  • CONFIDENTIALITY CLAUSE: A SETTLING CONDITION IN SECURITIES ARBITRATION Confidentiality clauses in securities arbitration settlement agreements are normally requested by brokerage houses and agreed to by claimants as a condition of settlement of a securities arbitration dispute.  Claimants are prohibited from disclosing anything regarding the settlement, particularly the facts underlying the arbitration and the amount of money being paid. This may seem to be an ...
  • MARGIN ACCOUNTS – ANOTHER FORM OF CHURNING A previous article by Jack Waymire, What are my Costs when Financial Advisors Buy & Sell Securities? discussed how advisory fees impacted activity in a managed account.  He also touched on certain accounts that he characterized as churning. In a purely legal sense, churning is excessive buying and selling for the purpose of generating commissions for the stock ...
  • FINRA’S SUITABILITY RULE AND UNINTENDED CONSEQUENCES The history of securities arbitration, a creation of the brokerage industry, is also a story of unintended consequences.  One of those unintended consequences is known as the Suitability Rule, the cornerstone of customer consumer protection in securities arbitration. The story began in the 1930′s when, following the Great Depression, Congress passed the Securities and Exchange Acts ...
  • IS INVESTING IN BONDS A SAFE INVESTMENT? The assumption that bonds are a uniformly “safe” investment is not always true. Some bonds are unrated and must be evaluated by your financial advisor and broker. Many unrated bonds are underwritten by brokerage houses and sold to their customers. Typically the prospectus is complex, lengthy, and presented in dense legalese. Only your stock broker ...
  • FINANCIAL ADVISORS CONFUSE FINANCIAL PRODUCTS WITH LEGAL TERMS The latest wrinkle of marketing financial products are “Free Seminars”. The focus is on long term care, protection of assets, retirement planning and estate planning. The primary threat is that the cost of long term care in a nursing home can consume your entire life savings. You need a package of financial and legal products. ...
  • Another Bond Nightmare – The Lakeside 370 Levee District Bonds & Stifel Nicolaus Just west of St. Louis in the flood plain of the Missouri River is the City of St. Peters in St. Charles County, Missouri. In what should have remained flood plain the City built a levee for a retail and office development. In 2008 the City’s Levee District, for the purpose of improving the levee, ...

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