Auctions ARS as Investments: Good, Bad, and Ugly
September 1, 2008 07:14

The thrill of it all: Long-term investments like auction rate securities (ARS) have a short-term twist -- the interest rates or dividends they pay are reset at frequent intervals through auctions.

That's not necessarily a bad thing but recently the credit market has caused many auctions to fail. ARS investors who thought these securities were a ready source of cash are now short on funds. Loss of liquidity does not mean that you cannot ever get your money back. But, if you need money now, any illiquid investment can be a financial hardship.

ARS auctions can fail when supply exceeds demand-when there are not enough bids to purchase all the securities offered for sale in the auction. When an ARS auction fails, current investors will continue to hold their securities and will generally receive an interest rate or dividend set above market rates for the next holding period-up to any maximum disclosed in the offering documents.

Due to the failing credit market-a significant number of auctions have failed, leaving some investors who counted on immediate access to their funds wondering - what next?
Hold on if you don't need the money right away

Borrow money but this is not without risks and great expense - read the fine print. The brokerage firm you are dealing with can force the sale and also may sell without contacting you or may increase their house maintenance without contacting you.

Liquidate other investments. Beware of tax consequences.

Ask your broker whether any ARS you hold are eligible for redemption. If so, and if the redemption is partial, your brokerage firm should be able to tell you what procedures it is following to allocate shares among its customers.

If you think your broker has acted inappropriately, contact Anapol Schwartz. You may be eligible for a securities litigation lawsuit.

Source: FINRA

Investment Advisor Agrees to Pay $5 Million to Ohio Workers' Comp Fund
June 9, 2008 08:38

A hedge fund manager who was convicted of defrauding the Ohio Bureau of Workers' Compensation to the tune of $216 million has agreed to pay the Bureau $5 million plus court costs to end a civil suit filed against him.

Mark D. Lay of MDL Capital Management and MDL Active Duration Fund has not admitted wrongdoing, but made "'a business decision'" to stop contesting the state's civil lawsuit, his attorney told the Columbus Dispatch Newspaper.

"He has to swallow hard to put this behind him because he needs to move on," Columbus attorney Percy Squire said.

Tags: Mark D. Lay, MDL Capital Management, MDL Active Duration Fund, Ohio Bureau of Workers' Compensation, workers' comp fraud

Enron Case Tests SEC's Allegiances
June 1, 2007 06:40

When the Securities and Exchange Commission files a brief in legal disputes, it is usually a nonevent. But the cases usually don't involve Enron Corp. In recent weeks, the agency has been publicly and noisily pressured by a congressman, a union leader and a Democratic presidential candidate, amid increasing consternation the agency is favoring business interests in its decision making. As a result, the SEC's decision about whether to weigh in on a Supreme Court case as well as on a similar case seeking the high court's attention has become a test of its own motto: �investor protection.� The cases revolve around a similar question: Can shareholders sue third parties, such as investment banks, for another company's fraud? The SEC hasn't been asked by the Supreme Court to file a �friend of the court,� or amicus brief, but lobbying by high-po/wered plaintiffs lawyer Bill Lerach, who represents shareholders in the Enron case, has boxed the agency into a corner. Unless it sides with shareholders, the SEC could be criticized as an ally of business for wanting to restrict the number of ways investors can sue.

Kara Scannell, Wall Street Journal, ConsumerWatchdog.org 5/29/07
http://www.consumerwatchdog.org/corporate/nw/?postId=8004&pageTitle=
Enron+case+tests+SEC%27s+allegiances

UBS Brokerage Account Fee Fraud
May 8, 2007 07:19

The office of New York Attorney General Eliot Spitzer has filed suit against UBS Financial Services, Inc. (UBS), charging that the company defrauded thousands of customers through its InsightOne brokerage program. The lawsuit details how UBS moved inappropriate... (Read Article)

Equity-Indexed Annuities (EIA): Bad Investments Especially for Seniors
May 5, 2007 08:15

Equity-Indexed Annuities (EIA): Bad Investments Especially for Seniors - http://www.forbes.com/columnists/columnists/free_forbes/2005/0919/240.htmlEquity-indexed annuities EIA are contracts with insurance companies that pay investors part of the capital appreciation... (Read Article)

Single Mother Wins Investment Misconduct Arbitration
January 24, 2007 08:56

Anapol Schwartz obtains settlement for investor victim defrauded by brokerage firmPHILADELPHIA--Catherine Humphrey-Bennett, attorney for Anapol Schwartz law firm recently obtained a six-figure settlement in an NASD arbitration case in favor of a single mother... (Read Article)