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Category Archives: Uncategorized

Attorney Mark Maddox Quoted in IBJ Article

Checkout the article Attorney Mark Maddox was quoted in below.


Summary of the Department of Labor’s Action to Protect Retirement Savers

Earlier this week, the Department of Labor delivered a proposed rulemaking to guard investors from backdoor payments and hidden fees in retirement investment advice. The below summary is from the fact sheet of the proposal for action.

Backdoor Payments & Hidden Fees Often Buried in Fine Print Are Hurting the Middle Class: Conflicts of interest cost middle-class families who receive conflicted advice huge amounts of their hard-earned savings. Conflicts lead, on average, to about 1 percentage point lower annual returns on retirement savings and $17 billion of losses every year.

The Department of Labor is protecting families from conflicted retirement advice. The Department issued a proposed rule and related exemptions that would require retirement advisers to abide by a “fiduciary” standard-putting their clients’ best interest before their own profits.

The Proposed Rule Would Save Tens of Billions of Dollars for Middle Class and Working Families: A detailed Regulatory Impact Analysis (RIA) released along with the proposal and informed by a substantial review of the scholarly literature estimates that families with IRAs would save more than $40 billion over ten years when the rule and exemptions, if adopted as currently proposed, are fully in place, even if one focuses on just one subset of transactions that have been the most studied.

The Administration Welcomes Feedback: The issuance of a notice of proposed rulemaking and proposed exemptions begins a process of seeking extensive public feedback on the best approach to modernize the rules of the road on retirement advice and set new standards, while minimizing any potential disruption to the many good practices in the marketplace. The proposal asks for comments on a number of important issues. We look forward to hearing from all stakeholders. Any final rule and exemptions will reflect this input.

For more information follow the link below:



Former JPMorgan Chase Broker Oppenheim, Charged in $20 Million Fraud

Our firm will be looking into investor complaints against former JPMorgan Chase broker, Michael J. Oppenheim, as a result of the federal authority’s accusations of embezzlement from his clients over the past four years. Checkout the latest on this breaking story below.



What to Know about Liquid-Alternative Mutual Funds

With low interest rates hampering the returns of conventional bond funds, the new alternatives are booming in popularity, such as liquid-alternative mutual funds. Sold as portfolio diversification, these “Hedge Funds for the Masses”, bring complicated fixed-income assets within reach of the average investor, who should be frightened at how these funds perform in turbulent markets.

The SEC has taken notice. In a document spelling out its priorities for examinations of the financial industry this year, it said one focus would be the “leverage, liquidity, and valuation policies and practices” of funds holding alternative investments. The SEC pinpointed fixed-income-focused funds specifically, and said it would review whether they mislead investors about how easily the funds can sell their holdings

If market instability were to occur, fixed-income prices can rise and fall quickly. Hedge funds usually are able to ride out the bumps, due to their lockups, but these newer funds may be forced to sell their positions at inopportune moments, leading to big losses for some investors. Click here for pointers when investigating future investments into liquid-alternative funds.

JPMorgan Executives Deposed in SEC Asset-Management Probe

On March 31, 2015, Bloomberg reported that JPMorgan Chase & Co. executives have been deposed and thousands of pages of internal documents subpoenaed as part of a U.S. investigation into the bank’s asset-management unit, according to people familiar with the situation.

The Securities and Exchange Commission’s enforcement division is purportedly investigating whether senior asset-management executives at the bank and its brokerage affiliate, J.P. Morgan Securities, developed a strategy that used bonuses and other incentives to improperly encourage their financial advisers to steer pension, institutional and retirement account clients into in-house funds, structured notes and other investments that generate fees for the bank – a practice that is internally referred to as “guided architecture” according to the Bloomberg report.

Regulators are also reportedly interested in the bank’s use of its own funds inside products it has marketed to retail investors, including an all-in-one investment called the “Chase Strategic Portfolio.”

The SEC’s investigation into potential conflicts of interest at JPMorgan, a probe that began roughly two years ago, has reportedly become more active in recent months. It is being assisted by the Office of the Comptroller of the Currency, which oversees national banks.

JPMorgan’s asset-management unit has faced criticism in recent years, including by advisers who alleged they were pressured to sell in-house products even when it wasn’t in their clients’ best interests. JPMorgan’s asset-management unit includes investment advisers — who oversee pensions, trusts and private accounts — and also manages funds in which those clients could invest, generating fees for the bank.

Market Concern over Bond Funds’ Liquidity

Generating another risk for financial markets, Bond funds might depend on investors who can take their money out at any time. Potentially causing big losses for investors in funds, if lots of bondholders want to sell at the same time. Another problem with a greater scope for hefty redemptions by fund investors to elicit such market chaos.

For a deeper look into this rising concern: http://www.wsj.com/article_email/bond-funds-liquidity-presents-market-concern-heard-on-the-street-1427389105-lMyQjAxMTI1MTI3ODgyNzg5Wj

SEC Files Fraud Charges Against Lynn Tilton & Patriarch Partners Over its Zohar Funds

On March 30, 2015, the SEC filed administrative fraud charges against Lynn Tilton (“Tilton”); Patriarch Partners, LLC (“Patriarch”); Patriarch Partners VIII, LLC (“Patriarch VIII”); Patriarch Partners XIV, LLC (“Patriarch XIV”); and Patriarch Partners XV, LLC (“Patriarch XV”).

According to the SEC complaint, it is alleged that, since 2003, Respondents have defrauded three Collateralized Loan Obligation (“CLO”) funds they manage and these funds’ investors by providing false and misleading information, and engaging in a deceptive scheme, practice and course of business, relating to the values they reported for these funds’ assets.

A CLO fund is a securitization vehicle in which a special purpose entity, the issuer, raises capital through the issuance of secured notes and uses the proceeds to purchase a portfolio of commercial loans.

The three CLO funds, collectively known as the “Zohar Funds,” raised more than $2.5 billion from investors and used these investments to make loans to distressed companies. However, many of the distressed companies have performed poorly and have not made interest payments, or have made only partial payments, to the Funds over several years.

Despite the poor performance of many of the Funds’ assets, the SEC has alleged that Tilton intentionally and consistently directed that nearly all valuations of these assets be reported as unchanged from their valuations at the time the assets were originated. As a result, Tilton and her entities purportedly received almost $200 million in excess fees from the Funds.

The SEC’s administrative complaint can be found at http://www.sec.gov/litigation/admin/


FINRA Orders Oppenheimer to Pay $3.75 Million in Broker Fraud Case

Oppenheimer & Co. has been ordered to pay $3.75 million for allegedly failing to properly supervise a broker that FINRA says defrauded dozens of clients and who also cheated the producers of a Broadway musical.

FINRA says the firm failed to supervise an ex-broker despite detecting unnecessary trades and overlooked other “red flags” indicating that Mark Hotton was wiring funds from customer accounts to businesses he owned or controlled.

For more information: http://www.wsj.com/articles/oppenheimer-ordered-to-pay-3-75-million-in-broker-fraud-case-1427389139

Miguel Mattei Zapata Hit with $500K Clawback, $6M in Client Complaints

A former UBS and Wells Fargo advisor, Zapata has been ordered by FINRA to reimburse $500,000 to his ex-employer Wells Fargo for failure to pay back a promissory note, and will be answering to seven client complaints that allege more than $6 million in damages for misconduct at his most recent employer, UBS. According to Zapata’s FINRA BrokerCheck record, the complaints, he is now facing during his time at UBS, include allegations of overconcentration and misrepresentation of closed-end funds. He was terminated from UBS in November 2014. These complaints mirror the wider problems that UBS and its advisors are facing for their sales of municipal bonds and closed-end funds in Puerto Rico since 2013. Over the past year the number of complaints in Puerto Rico have soared, leading FINRA to boost the size of the arbitrator pool. There are currently about 700 eligible arbitrators on FINRA’s roster, a figure the regulator is trying to increase further.

Concern for Investing in “Target Funds”

It’s essential for investors to make a knowledgeable decision about investing their 401(k) money in a target-date fund or in other options. Retirement-plan investors frequently aren’t sure how to distribute the money they’re putting away. So the growth of target-date funds, which automatically shift investors’ money from stocks to fixed income gradually over the years, has been widely seen as a success for the country’s retirement readiness. Experts worry that some investors who don’t fully understand these funds might take on more risk than they want. Target-date approach surprised many investors with a decline in their funds during the 2008 financial crisis.

“That experience should have served as a wake-up call for investors and the relentless growth in target-date funds is troubling because studies have shown that investors and industry professionals alike do not fully appreciate the risk these funds present,” Luis A. Aguilar, SEC member. Investors should be aware that target-date funds can have confusing names and large fees.

To evaluate a target-date fund, check the prospectus to determine the glide path, the changes in allocations over time, to make sure the fund is taking an amount of risk over the years that the investor is comfortable with. Typically, 401(k) plans offer a series of target-date funds from the same fund company, so investors who can’t find one with low fees and their preferred risk profile might prefer to do things the traditional way, to invest in the stock and bond funds their plan offers and commit to doing the rebalancing in the years ahead themselves.

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