D&G Law

Securities Litigation Blog

A Warning for Baby Boomers Friday, 16 December, 2011

Donaldson & Guin, LLC - securities fraud litigation blogThe Wall Street Journal reports (Dec. 14, 2011 at pg. C1) that securities regulators and prosecutors are “battling … a nationwide surge in investment fraud against baby boomers.” Today’s older workers, unlike their parents, will be reliant on their own 401k portfolios in their retirement years. Although the stock markets rebounded somewhat since the crash, the DJI is still 15% below its 2007 peak, causing many people on the cusp of retirement to grasp for higher returns. Securities regulators report “rampant” abuses. Like hunters shooting prey on baited fields, slick-talking salesmen hawk promissory notes, real estate deals, gold mines, and oil wells to unsuspecting seniors grazing at free-lunch seminars. During our many years of representing defrauded investors, we’ve noticed that when interest rates are especially low – as they are today – many people fall victim to promises of higher yields. It’s heart breaking to hear the stories of people who have saved all of their working lives only to lose their hard-earned savings due to fraud. Be careful out there. Just because they’re holding a fountain pen instead of a gun doesn’t mean they aren’t trying to steal your money.

For more information, please see the following Wall Street Journal article:




A Lawyer’s Role in Keeping Wall Street Honest Tuesday, 13 December, 2011

We’ve all heard one – that is, the typical bloodsucking lawyer joke. But lawyers play a vital role in keeping banks, large companies, accountants, brokers and other Wall Street types honest … or at least accountable for their actions. While the Justice Department has prosecuted relatively few major players in the economic crisis, law firms across the country have held those same people and entities financially accountable for their bad decisions.

Last week, hedge fund manager John Hussman compared Wall Street to “little more than a glorified crack house,” where traders, bankers and brokers seek risky instant gratification rather than sustainable growth and returns. This is exactly the type of behavior financial litigators seek to curtail. Ultimately, Wall Street’s accountability for its actions is tied to effective prosecution of lawsuits against the perpetrators of financial mismanagement.

For more information, please see Hussman’s commentary at the following link:



The Next Time That Nigerian Prince Asks You For Money, It May Be Legal – House Votes Overwhelmingly to Allow “Crowdfunding” Monday, 28 November, 2011

Donaldson & Guin, LLC - securities fraud litigation blogBy a vote of 417-17, on November 3rd, the House of Representatives passed a bill to amend the securities laws to allow issuers to raise money by “crowdfunding.” If the bill becomes law, would-be entrepreneurs will be able to sell securities to an unlimited number of investors without having to first register the securities with the SEC. Each investor will be allowed to purchase up to $10,000 from each offering (or 10 percent of the investor’s annual income, whichever is less). Each issuer will be allowed to sell up to $1 million per offering and purchasers will be restricted from selling the securities for a year following purchase. The bill affords little protection to investors. It only requires that issuers “take[] reasonable measures to reduce the risk of fraud with respect to such transaction[s]”, to provide the SEC with a physical address, a website address and the names of the issuer’s principals and employees and to “maintain such books and records as the [SEC] determines appropriate.” Given the low interest rates currently available to investors and the low barriers to capital that this bill affords, the crooks will come out of the woodwork. Legitimate small businesses may find that it’s more trouble than it’s worth to have an unlimited number of very small stakeholders in their businesses.

SEC Charges Morgan Stanley with Securities Law Violations for Improper Fees Monday, 21 November, 2011

Consumers of financial products and financial services get gouged by excessive and sometimes improper fees every day, many times without the consumer’s knowledge or consent. Last week, the Securities and Exchange Commission (SEC) charged Morgan Stanley’s investment management division with securities law violations involving fees improperly charged to some investment fund clients. According to the SEC’s cease-and-desist order, Morgan Stanley allegedly instituted a fee arrangement in which customers of its Malaysia Fund were charged repeatedly for third party advisory services that they were not receiving, and Morgan Stanley failed to properly report those fees to the Fund’s board of directors and shareholders.

In another victory for the SEC’s Asset Management Unit, which scrutinizes investment advisor contracts and advisory fees, Morgan Stanley has agreed to pay more than $3.3 million to both settle the charges alleged by the SEC and provide restitution to investors.

To learn more about this ongoing investigation, see the SEC’s website at:




U.S. Investors May Have Limited Recourse in Massive Olympus Fraud Tuesday, 15 November, 2011

Last week, we emphasized the numerous but unsurprising reports of financial shenanigans these days – which cost investors billions of dollars each year. Today is no different. Olympus Corporation, the Japanese manufacturer of optics and reprography equipment, has announced that it “discovered … that it had been engaging in activities such as deferring the posting of losses on investment securities.” And that’s just the blurb from Olympus’s own website.

Since the scandal erupted in mid-October, Olympus has lost 70% of its market capitalization value (more than $6.4 billion). However, few, if any, U.S. investors will recoup money they have lost due to this massive accounting fraud. Why? In June of 2010, the United States Supreme Court in Morrison v. National Australia Bank, overturned decades of securities law jurisprudence, holding that the U.S. securities laws do not apply to extraterritorial transactions in which, for example, U.S. investors purchase shares from foreign stock exchanges. The unfortunate and unjust result is that U.S. investors who purchased Olympus stock through the Tokyo exchange cannot sue in U.S. court – even though the deceptive or misleading statements were made in this country.

The Olympus scandal provides yet another example of the gutting of our securities laws and the need for domestic protection of U.S. investors from securities fraud.

For more information, please see the following links:



Class Actions Filed Amidst MF Global Scandal Monday, 07 November, 2011

Reports of large financial institutions mishandling client funds or engaging in risky investments are no longer surprising in the wake of this country’s financial crisis. However, MF Global provides one of the most dramatic examples of a financial institution’s implosion since Lehman Brothers folded in 2008. Apparently, $600 million in clients’ funds are missing. In the midst of MF Global’s bankruptcy filing last week, and subsequent realizations regarding the company’s heavy investment in European sovereign debt and apparently inadequate financial disclosures, two class action lawsuits have been filed against the company on behalf of investors. Both complaints allege that MF Global made false and misleading statements to investors regarding, among other things, inadequate liquidity levels and internal control problems in segregating client funds. MF Global is also under investigation by the Securities & Exchange Commission and the Commodity Futures Trading Commission. The firm’s CEO and former head of Goldman Sachs, John S. Corzine, resigned last Friday. For more information, please see the following stories.