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Category Archives: Uncategorized

Steven B. Caruso, Partner at Maddox Hargett & Caruso, P.C., to Speak at 2015 PLI Securities Arbitration Program

Steven B. Caruso, the Resident Partner in the New York City office of Maddox Hargett & Caruso, P.C., has been invited to participate as a speaker at the 2015 Practicing Law Institute (PLI) conference program that will be held on Thursday, July 30, 2015.

The PLI Securities Arbitration program will be held at the PLI New York Center and will also be broadcast online by webcast.  The program brings together leading legal professionals and securities industry regulators to discuss hot topics in the securities arbitration practice area.

For more information on this conference, visit:


Bond ETFs and Liquid Alternative Funds – Preparing for Panic on Main Street

On July 21, 2015, The Wall Street Journal reported on a growing number of hedge funds who are looking to profit from an anticipated decline in the prices of exchange-traded bond funds (ETFs) and liquid alternative funds. (“Hedge Funds Gear Up for Another Big Short”)

Among the hedge funds, cited in the article, who are reportedly lining up in anticipation of potential trouble at some “alternative” mutual funds and bond exchange-traded funds that have boomed in popularity among retirees and other individual investors are Leon Black’s Apollo Global Management LLC, Oaktree Capital Management LP and Reef Road Capital LLC.

The predicate for their investment thesis is that the junk bonds, bank loans and esoteric investments held by some of those funds will be extremely hard to sell if the market turns, leaving prices pummeled in a rush for the exits.

As noted in the article, “critics said both sets of products suffer from a similar weakness. They promise investors the ability to trade in and out as they would with a stock, but the underlying securities trade far less frequently, meaning there may not be buyers waiting when the funds line up to sell.”

If this prediction should come to pass, the hedge funds would then offer the liquid-alternatives funds and bond ETFs cut-rate prices for thinly traded holdings like low-rated corporate debt and bank loans when they are forced to sell to meet daily redemptions.

Just last month, for example, it has been reported that BlackRock, Inc. asked the SEC for permission to borrow from some of its mutual funds to pay redemptions in others. A spokeswoman for BlackRock is quoted as having said the firm’s liquid-alternative products were among those it may use to take advantage of the practice. The SEC decision is pending.

If you are an individual or institutional investor who has any concerns about Bond ETF or Liquid Alternatives investments having been recommended for purchase in either your retirement or non-retirement accounts, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

New York Stock Exchange Suspended Trading Today

The New York Stock Exchange halted trading around 11:32am today, stating it was due to technology issues. We will be investigating cases for investors that had losses related to the events that happened today, July 8, 2015. Follow this link to learn more on this developing story.





JP Morgan, SEC Talk Settlement over Investment-Recommendation Concerns

The SEC is examining J.P. Morgan for guiding clients to their own proprietary products and away from offerings by other firms. Generally leading to higher fees for the bank, the practice, while not banned, is closely watched by regulators. The bank says they have been responding and cooperating with the authorities. Regulators continue to monitor brokers selling their clients the right product for them, or whether they push the ones that make the firm the most money. Finance Advisers can operate under different rules depending on whether they register as an investment adviser with the SEC. If so, adherence to a fiduciary standard requiring them to recommend only those investment products that are in the best interests of their clients is required. The Government, along with industry participants have been working on policies to address alleged conflicts of interests on Wall Street for years. This April, the Labor Department released a proposal that would require brokers giving retirement advice to make recommendations in their clients’ best interests. The JP Morgan settlement with the SEC, containing their fine could happen later this summer.

SEC Charges 36 Firms Over Fraudulent Municipal Bond Offerings

Operating in the $3.7 trillion muni market, 36 municipal bond underwriters ordered collectively to pay about $9 million in compensation over fraudulent offerings, as part of the first pact of its kind with U.S. regulators.

Link to the SEC’s orders and penalty amounts:


Business Development Companies (BDCs) – Look Before You Leap

The latest “hot” product being offered from Wall Street to Main Street investors is an investment in Business Development Companies (BDCs) which are either publicly registered or non-traded entities that provide financing to small and mid-sized businesses – some of which are experiencing significant financial or business difficulties.

BDCs seek to generate a higher amount of current income and, to a lesser extent, capital appreciation, through direct originations of secured debt, including first lien, first lien/last-out unitranche and second lien debt, unsecured debt, including mezzanine debt and, to a lesser extent, investments in equities.

Unfortunately, many financial advisors have pitched these products to their retail clients without having conducted the necessary due diligence on them or, of equal importance, without having an informed appreciation for the potential pitfalls of BDCs as their higher yields are typically also associated with significantly higher risks – many of which are being concealed from investors.

Notwithstanding the sales pitch that an investor may receive, it should be clear that investing in BDCs involves a high degree of risk, including credit risk, derivative risk and the risk of the use of leverage which could potentially magnify losses, and that they are, without exception, highly speculative. The securities in which BDCs invest will generally not be rated by any rating agency, and if they were rated, they would be below investment grade. Moreover, these securities, which may be referred to as “junk bonds,” have predominantly speculative characteristics with respect to the issuer’s capacity to pay interest and repay principal.

One of the most immediate concerns associated with BDCs, however, is the potential impact that the much anticipated increase in interest rates later this year by the Federal Reserve will have on both their business activities and their valuations since the majority of their debt investments will be long-term and will be tied to various floating rates such as the London Interbank Offer Rate (“LIBOR”), the Euro Interbank Offered Rate (“EURIBOR”), the Federal Funds Rate or the Prime Rate.

In fact, it is widely recognized that general interest rate fluctuations may have a substantial negative impact on many BDC investments (as increased interest rates from their historically low present levels may make it more difficult for their portfolio companies to service their debt) and, accordingly, this may also have a material adverse effect on the rate of return on invested capital, net investment income and the fair value determination of the net asset values of BDCs.

If you are an individual or institutional investor who has any concerns about BDC investments having been recommended for purchase in either your retirement or non-retirement accounts, please contact us for a no-cost and no-obligation evaluation of your specific facts and circumstances. You may have a viable claim for recovery of your investment losses by filing an individual securities arbitration claim with the Financial Industry Regulatory Authority (FINRA).

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.

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