FinancialCounsel

SNSFE Investigating Harbor Financial Services And James Kleinkopf Of Mobile, Alabama

Attorneys at SNSFE are investigating Harbor Financial Services and its registered representative, James Kleinkopf of Mobile, Alabama.  The investigation revolves around excessive trading and unsuitable investments in the account of at least one elderly person.  Those with information should contact attorneys at SNSFE.

SNSFE Investigating Complaints Regarding Auction Rate Securities, Liquidity Concerns And Inappropriate Margin Loans

Attorneys at SNSFE are investigating abuses in auction rate securities as disgruntled investors cannot cash out of these investments.  Auction rate securities, or ARS, are long-term municipal bonds, corporate bonds or preferred stocks that are traded at auctions that set the instruments' interest rate and ultimately the price of the security.  Retail buyers can get in with as little as $25,000.  But the liquidity has dried up,  especially after major Wall Street firms stopped bidding in auctions last month.  And then, many investors discovered that they couldn't get their cash.   

Whether or not liquidity returns is besides the point according to some commentators and SNSFE is investigating a full panoply of abuses associated with these products.  Also, investors ought to beware that firms have been coming up with other liquidity options, such as offering loans against ARS.  But margin loans involve other risks, such as the possibility of losing securities from a sellout.  Information can be shared with attorneys at SNSFE.

SNSFE Investigating Abuses With Reverse Mortgages In Light Of FINRA Investor Alert

Attorneys at SNSFE are investigating the suitability of reverse mortgages for senior investors.  FINRA, the Financial Industry Regulatory Authority has issued an Investor Alert urging homeowners over the age of 60 to carefully weigh all of their options before tapping into their home equity through reverse mortgages to obtain additional income for their retirement years:

A reverse mortgage is an interest-bearing loan secured by the equity in a home and can be helpful to homeowners having trouble meeting expenses.  The FINRA Alert cautions homeowners that these loans - which are being aggressively marketed as an easy, cost-free way for retirees to finance lifestyles or to pay for risky investments - can jeoparize their financial futures.

The new Investor Alert, "Reverse Mortgages:  Avoiding a Reversal of Fortune," explains how these loans, often called "rising debt" loans, allow borrowers to convert their home equity to cash to be used for any purpose.  The Alert advises homeowners considering these types of loans to use the funds wisely.  The Alert goes on to warn investors that if they are approached by a financial professional to do a reverse mortgage in order to fund a particular investment, they should keep in mind that all investments carry risks and costs - and the higher the promised return, the higher the risk.  And, in some cases, those who sell the mortgages may profit from the sale of the proposed investment, giving them twice the incentive to talk someone into a loan they may not need.

"Reverse mortgages are an extremely costly way to fund an investment," said FINRA CEO Mary Schapiro.  "Homeowners need to consider all the risks and explore all of their options before taking out a loan that may prematurely deplete their home equity, which is often a homeowner's most valuable asset and most precious source of retirement security."

The Alert explains that reverse mortgages were originally designed as a tool for aging, low-income homeowners to keep their homes.  Now, as more and more Americans are retiring and sitting on large pools of home equity, they are beginning to use reverse mortgages as a way to finance a more extravagant retirement lifestyle than they could otherwise afford.  The Alert reminds homeowners reverse mortgages should generally be a last resort and offers tips to anyone considering these types of loans.

Source:  FINRA News Release

Anyone with information regarding reverse mortgage abuses are urged to contact attorneys at SNSFE.

Some Firms Not Honoring Their Obligation To Return Money To VRDN Investors, And SNSFE Is Investigating

Financial Week has reported that money funds are dumping variable-rate notes that banks must honor.  The latest securities acronym to hit a snag are VRDNs.  The $380 billion market for variable rate demand notes has seen them dumped en masse over the past few weeks by money market mutual funds that invest in them, reported Peter Crane, founder of money fund researcher Crane Data. 

VRDNs are similar to auction-rate securities in that they are a form of long-term debt tied to short-term interest rates commonly issued by municipalities, but unlike auction-rate securities they have a put option, so banks are required to give investors their money back.  That last feature makes them an acceptable investment for money market mutual funds.  "That's why you've seen a whipsaw in yields [in money-market funds]," Mr. Crane said. "Two weeks ago they fell through the floor," he said, "because of all of the VRDNs that had been put back to the banks.  Money funds got their money back and had nowhere to reinvest it," he noted.  Mr. Crane said that his index of tax-exempt money fund yields fell to a low of 1.5% on February 20th before recovering to 2.43% last week. 

But money funds and corporate investors interested in exiting VRDNs may find some run-around from broker-dealers.  Reuters reported last week that some banks were making it harder for clients to sell VRDNs by sending them to tender agents before cashing out.  SNSFE is investigating these recent developments and welcomes any comments or information.