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Securities Law

Falling Apple’s Price Causes Collateral Damage

As the price of Apple has declined from over $700 per share to below $500 per share, it’s not just Apple shareholders who are feeling blue.

Wall Street sold a ton of “structured notes” based on the price of Apple stock as a “reference” security. And the frenzy for the notes was greatest in the weeks before Apple’s stock price peaked in September.

Under these notes, often called “reverse convertibles”, it appears to an investor that he or she is buying a fixed income or bond-like investment which would rise as the price of Apple rises and that the return would mimic or exceed the return of the Apple stock while acting like a bond. Unfortunately, as Apple has cratered in value, so has the value of the Apple based structured notes.

Many brokers pushed the structured notes as “safe and guaranteed” ways to benefit from the Apple rise without the risk. Unfortunately, the opposite is true, as Apple has plummeted.

This means that investors who thought they were buying a fixed income product get beaten up Apple shares which they never intended to buy.

One or two reporters have picked up on the dangers such structured notes linked to Apple pose for investors. Back in December, the risk in such Apple-linked notes became apparent, according to Kevin Dugan of Bloomberg.

“More than $241 million of structured notes tied to Apple Inc. face losses after a 27 percent drop in the stock of the world’s most valuable company eroded built-in cushions that protect investors,” Dugan wrote. “Banks issued 76 US notes linked to Apple stock during the seven weeks starting August 20 when the company was valued at $650 a share or more,” Dugan continued. In total, banks issued $1.66 billion of such notes, making Apple the most popular underlying company in such high commission structured products.

Some stock jockeys very likely sold the product without explaining to investors the incredible risks they faced. Indeed, many of the securities were created to absorb a 20 percent decline in value before investors are at risk of losing principal or coupon payments, but the stock has dropped more than that already.

And Apple-linked structured products aren’t the only culprits in the market. The same holds true for other structured notes which have seen a decline in the past year such as notes based on oil prices or other declining indexes.

Meanwhile, Apple released its earnings Wednesday afternoon, and, despite the company’s record revenue and profits, investors were not impressed. There is fear in the market that Apple has peaked. Its share price was down more than 7 percent in after hours trading to $482.45. That’s down 30% off its September high and means there is real trouble ahead for clients who thought they were paying a bond linked to Apple but instead are winding up with a tech stock that is cratering.

Investors simply need to avoid these complex, high risk products.

Suffered losses in Apple reverse convertibles? Visit the securities law firm of Zamansky & Associates.

Class Action Lawsuit Filed Against David Lerner Associates

Zamansky & Associates LLC announces that on June 20, 2011 it filed a class action lawsuit against David Lerner Associates, Inc. (”David Lerner”) and its senior officers, Apple REITs Six through Ten (”Apple REITs”) and their principal Glade M. Knight, in the United States District Court, District of New Jersey, Case No. 2:33-av-00001. The lawsuit was brought on behalf of all investors in the $3.2 billion of non-traded Apple Real Estate Investment Trusts (”Apple REITs”) sold by David Lerner. If you were an investor with a substantial loss, contact Jake Zamansky at (212) 742-1414, or email at

The class action complaint alleges that David Lerner acted negligently in its sales, marketing and underwriting of more than $6.8 billion of shares in the Apple REITs to DLA’s brokerage customers. DLA allegedly sold Apple REITs to many customers who were elderly, retired and/or unsophisticated by misstating the fundamental business model of the Apple REITs, omitting material information about how the Apple REITs were intended to operate, omitting to disclose material risks associated with an investment in the Apple REITs, and misrepresenting the value of Apple REIT shares and the returns investors would receive on their investments. DLA allegedly told investors that Apple REITs which invested in extended stay hotels such as Marriott and Hilton paid safe and secure returns from earnings generated by revenues. Read the rest of this entry »

FINRA Fines UBS $2.5 Million

Jake Zamansky: FINRA Fines UBS.

Since our firm won the first case against UBS in the Fall of 2009, we have known this day was coming. Now, it’s official. FINRA has fined UBS $2.5 million and ordered it to pay restitution to some of its retail customers as a result of its misconduct in selling so-called 100% Principal Protection Notes issued by Lehman Brothers. UBS lied to its customers to line its own pockets, and now it is paying the price.

We are representing over thirty additional investors who were sold Lehman PPNs by UBS, and are seeking to obtain full recovery for these investors in FINRA arbitration cases.

If you wish to discuss filing a case to recover your losses at UBS in Lehman structured products, please call Jake Zamansky at (212) 742-1414 or email

Original post: FINRA Fines UBS, Orders Restitution Over Lehman 100% PPNs

View FINRA’s press release.

View the detailed settlement from FINRA.

John Montague Faces the Court of Public Opinion

By NY Securities Fraud Lawyer Jacob Zamansky.

Last June, I wrote on this blog (see below) about a double-standard when it comes to prosecuting fraudsters.  In the post entitled, “Two Americas and the Prosecution of Securities Fraud,” I detailed a case we filed against a financial advisor in Southern New Jersey named John R. Montague of Questar Capital Corporation, which is a subsidiary of the insurance behemoth, Allianz.

Mr. Montague’s working class, retirement age clients allege that he stole millions and ran a Ponzi-like scheme to defraud them.  Unfortunately, while law enforcement agencies have concentrated their efforts on criminals like Bernard Madoff and Kenneth Starr who bilked the rich and famous, while Mr. Montague has walked around a free man.  Apparently, fraudsters who prey on working class investors are low on the priority list.

In light of today’s Philadelphia Inquirer story, it is clear that Mr. Montague needs to be brought to justice sooner rather than later.

Two Americas and the Prosecution of Securities Fraudby Jacob Zamansky on June 14th, 2010 at 3:47 pmFormer presidential candidate  Senator John Edwards is hardly someone to be cited in a blog post about morality and fairness, but he was spot on in his rallying cry about there being two Americas.  This painful reality was driven home to me in recent weeks while pursuing a case in New Jersey’s Gloucester County, a predominantly working class area in the backyard of my hometown, Philadelphia.

The case involves a purported “financial advisor” named John Montague, who was a registered representative with Questar Capital Corporation. The FBI has been investigating Montague since at least last August and possibly longer, but there appears to be no movement in the case.  I represent some elderly investors who Montague defrauded for over $1 million. Given that there are likely many other victims of  Montague’s alleged wrongdoing, it’s quite possible that Montague’s misappropriation of funds is well in excess of what  has already been documented.

My firm has long been a source of leads and other information for prosecutors and law enforcement agents, however, the Montague case doesn’t appear to be a priority for the FBI. For example, the US Attorney’s office is handling the investigation of Kenneth Starr, a money manager whose well heeled clients reportedly included a litany of bold-faced names such as Al Pacino, Uma Thurman, and Neil Simon.  With miraculous speed, prosecutors managed to nearly double the $30 million originally thought to be allegedly swindled by Starr. “In the less than two weeks since Kenneth Starr’s arrest, this investigation has maintained its velocity,” Manhattan US Attorney Preet Bharara told reporters last week.

Furthermore, Bernie Madoff, who orchestrated the biggest Ponzi scheme of all time, was convicted and sentenced in less time that it has taken the FBI to complete its investigation of Montague. The receiver overseeing the liquidation of the fraudster’s enterprise is reportedly expected to recover more monies than originally anticipated – so much so that some vulture funds are already buying up the claims.

The Montague case isn’t the only example of the wheels of justice grinding to a near halt when working class investors are defrauded of their monies.  I represent some working class investors in Long Island who were defrauded by a convicted felon named Peter Dawson more than three years ago.  Although Dawson sits in prison, Bank of America, Washington Mutual and other financial institutions who enabled Dawson’s fraud have yet to be held accountable.

There is a disturbing lesson here: When it comes to prosecuting securities fraud and garnering restitution for investors, working-class people shouldn’t expect the same level of prosecution and recovery as their wealthy brethren.

For more information about the John Montague investigation visit Jacob Zamansky.

FINRA and Australian Regulator Enter Cooperation Agreement

The Australian Securities and Investments Commission (ASIC) and FINRA entered into a Memorandum of Understanding (MOU) today to promote and support greater cooperation between the two regulators.  The MOU establishes a framework for mutual assistance and the exchange of information between ASIC and FINRA, to help ensure that high standards of market integrity and consumer protection are maintained in both jurisdictions. Among other things, the agreement will help the regulators to investigate possible instances of cross-border market abuse in a timely manner, exchange information on firms under common supervision of both regulators, and allow more robust collaboration on approaches to risk-based supervision of firms


Ex-Exec at Fla. Law Firm Charged in Ponzi Scheme

The former chief operating officer at the now-defunct law firm run by admitted Ponzi scheme operator Scott Rothstein was charged Tuesday with money laundering conspiracy for her alleged role in the $1.2 billion scam.

Debra Villegas, 42, was accused of helping Rothstein concoct the fake legal settlements used to lure investors — even forging the names of fictional plaintiffs and defendants on the documents. Villegas, of Weston, became the second person charged in the scheme that brought down the Fort Lauderdale-based firm Rothstein Rosenfeldt Adler — and there could be more to come.

"We remain committed to prosecuting investment fraud schemes and all who participate, from top to bottom," said U.S. Attorney Jeffrey Sloman of Miami.

Villegas faces a maximum of 10 years in prison if convicted. Prosecutors are also seeking forfeiture of $1.2 million in cash, a home in Weston valued at about $407,000 that Rothstein transferred to Villegas and $130,000 Maserati Granturismo Coup that was a gift from Rothstein.

An attorney for Villegas did not immediately respond to an e-mail message seeking comment. She is scheduled to appear in court Wednesday; the type of charging document filed by prosecutors typically indicates that the defendant will eventually plead guilty.


Goldman exec in alleged fraud to testify on Hill

A Senate panel investigating the financial crisis will hear next week from the Goldman Sachs trader at the center of fraud charges filed by the Securities and Exchange Commission.

The Permanent Subcommittee on Investigations says Fabrice Tourre will testify at a hearing about the role of investment banks in the financial crisis.

The SEC says Tourre marketed an investment that officials say was designed to lose value. The SEC says he failed to tell investors that the mortgage securities in the deal were selected by a hedge fund that was betting they would fail.

Goldman denies the charges.

The subcommittee says Goldman CEO Lloyd Blankfein also will appear at the hearing.


Galleon founder wins stay of wiretaps in civil case

Galleon hedge fund founder Raj Rajaratnam, accused of insider trading along with several associates, won a suspension of a court order to hand over wiretap evidence to U.S. market regulators, pending appeal.

The U.S. Court of Appeals for the 2nd Circuit in New York ordered a stay in favor of Rajaratnam and co-defendant Danielle Chiesi on Wednesday after a lower court order in February compelled them to disclose wiretap evidence gathered in the criminal case.

Lawyers for Sri Lanka-born U.S. citizen Rajaratnam and former New Castle Funds LLC trader Chiesi are seeking to suppress 18,000 recordings in what U.S. prosecutors describe as the biggest hedge fund insider trading case in the United States.

A trial on civil fraud charges brought by the U.S. Securities and Exchange Commission was set to start in August before U.S. District Judge Jed Rakoff.

Rajaratnam's lawyers argued before a three-judge appeals court panel on Tuesday that the use of the recordings in the SEC case ignored "the plain text" of the wiretap statute and privacy concerns.


Two Investment Firms Settle New York’s Pay-to-Play Investigation

The New York AG's Office announced that it has secured agreements with two major investment firms in the ongoing New York State Pension Fund investigation.  Markstone Capital adopts the Public Pension Fund Reform Code of Conduct and agrees to return $18 Million to the New York State Common Retirement Fund.  Wetherly Capital Group and its Broker-Dealer DAV/Wetherly Financial will exit the placement business and return $1 Million to the Common Retirement Fund.  According to AG Cuomo, Markstone and Wetherly are the eighth and ninth firms to adopt the Code of Conduct.

The Code of Conduct bans investment firms from hiring, utilizing, or compensating placement agents, lobbyists, or other third-party intermediaries to communicate or interact with public pension funds to obtain investments. To avoid pay-to-play schemes, the Code prohibits investment firms (and their principals, agents, employees, and family members) from doing business with a public pension fund for two years after the firm makes a campaign contribution to an elected or appointed official who can influence the fund’s investment decisions. This provision also bars all firms currently doing business with the pension fund from making such campaign contributions. Investment firms must also disclose any conflicts of interest to public pension fund officials or law enforcement authorities, to increase transparency and avoid abuse in the management of public pension funds.

Prison coach: Madoff was not afraid ahead of term

A prison coach who helped Bernard Madoff get ready for his 150-year sentence says the disgraced financier was not afraid before starting his term at a federal penitentiary in North Carolina.

Herb Hoelter (HOHL'-ter) told the CBS "Early Show" that Madoff was remorseful but composed when Hoelter met him four days before sentencing.

Hoelter said Madoff would not be in danger at the Butner prison, where he was transferred this week from a federal jail in New York.

Hoelter called Butner a "good facility" that is well-run. Hoelter said Madoff will get 300 minutes a month in phone time to make calls.

The 71-year-old Madoff pleaded guilty in March to charges that his investment advisory business was a multibillion-dollar scheme that wiped out thousands of investors and ruined charities.