Wall Street Fraud Cleanup Goes On…

Coral Gables, FLWall Street gone wonky has left an endless trail of victims separated from their hard earned savings by reckless and grasping investment dealers. Many of those victims are retired Americans living in the state of Florida where attorney Ben Fernandez and his colleagues at Tramont Guerra & Nunez are working on behalf of clients that got way less than they bargained for.

Fernandez recently filed a Financial Industry Regulatory Authority (FINRA) claim on behalf of a retired couple who lost $650,000 or approximately 30 percent of their nest egg in last year's Wall Street wobbles.

"Their portfolio was initiated for them to retire comfortably," says Fernandez. "Losing 30 percent of that portfolio has changed their retirement plans and changes their ability to generate income in the future. It definitely does change their outlook."

The claim filed with FINRA alleges that Merrill Lynch (subsequently acquired by Bank of America) advised the couple to invest in preferred banking stocks—a strategy that was much too volatile and unpredictable for investors looking to generate fixed income for retirement. "The clients had interest income and they had invested in bonds in the past. The bank preferreds were suggested as a suitable alternative to bonds," says Steve Ostrofsky, a financial expert who advises with the Fernandez's firm on financial litigation and arbitration issues.

Like many investors now facing catastrophic losses. "This couple relied upon their broker to provide them with investment advice and the bank preferred stocks at the IPO stage," says Fernandez. "That is a very risky allocation for seniors in the process of retirement."

"Ultimately, of course, the bank preferred lost a disproportionate amount of their value relative to equities," adds Ostrofsky. "These were conservative risk adverse investors, they have income requirements. They had just retired and the portion that was allocated towards income/fixed income securities had a disproportionate amount that was invested in bank preferred stocks."

Fernandez and Ostrofsky argue that the Florida couple was the victim of sales practice violations, fraudulent conduct and self-dealing. "The sales staff received bonuses and incentives for selling this product and that partly explains why their portfolio had an over-concentration in bank preferred IPOs," says Ostrofsky.

Ostrofsky further hammers home the point saying that Merrill Lynch failed to do due diligence on behalf of its clients – in other words it definitely should have known that trouble was brewing in the financial sector and that these investments were not suitable for people looking to generate income.

"These IPO funds were being raised in the middle of a widely publicized decline in the financial sector," he says. "These shares were being issued and sold in the face of unprecedented losses in the mortgage market."

"They were certainly on notice as to these losses," says Ostrofsky. Looking back at market conditions he believes Merrill must certainly been aware of. "The forward looking statements for many of the prospectuses did not properly disclose the risks that these banks continued to face."

Ben Fernandez is a graduate of the University of Florida (B.A. 1986) and Marquette University (J.D. 1991). The firm of Tramont, Guerra & Nunez is a bilingual firm, which represents investors who have experienced losses in the market as a result of misconduct by brokers, and their firms. It represents clients throughout the US and Latin America.