Recent Posts

Little Help For Investors From The Puerto Rico Supreme Court And Rumors

Yesterday, the Puerto Rico Supreme Court temporarily stopped the enforcement of the law signed by Gov. Alejandro Garcia Padilla on Christmas Eve with reformations to the teacher pension system. The Supreme Court blocked the reforms to the pension system that the government insists it needs to avoid a downgrade of Puerto Rico debt securities to junk status. Gov. Garcia Padillo stated “saving the teacher pension system and guaranteeing them sufficient pensions in line with the Island’s fiscal realities is an issue that demands a deep sense of responsibility, as does saving Puerto Rico’s credit rating,” a credit rating that is just one step away from junk status. Today the Supreme Court held a hearing on a lawsuit challenging a separate reform of the pension fund for the judicial system in Puerto Rico. You don’t have to think too hard as to what their decision will be in light of their ruling on teacher pension reform.

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Thomas Mikolasko Fined and Suspended by FINRA for Sales of Defaulted MMM Notes

Thomas Mikolasko, Registered Principal formerly with HFP Capital Markets, LLC (HFP) of New York, New York, was fined $75,000 and suspended for 18 months by the Financial Industry Regulatory Authority (FINRA) for his participation in the sale of Senior Secured Zero Coupon Notes which were sold to HFP customers for the entity Metals Millings and Mining, LLC (MMM). Mr. Mikolasko was an investment banker with HFP and was involved in the firm’s sale of $3 million of MMM Notes which have defaulted, leaving investors with neither their principal repaid nor the promised 100% return on their investment.

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Joseph Giordano Barred By FINRA for Sales of Unregistered and Unsuitable Debentures

Joseph Anthony Giordano, former Registered Principal of Capital Investment Group, Inc. (CIG) of Annapolis, Maryland and more recently with Meyers Associates, L.P. of Edgewater, Maryland, submitted a Letter of Acceptance, Waiver and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanctions and findings for the distribution and solicitation of unregistered Empire debentures, the solicitation of which was prohibited by CIG, and for making unsuitable recommendations to his customers.

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Conflicts of Interest In 401(k) Retirement-Plan Rollovers Are Prevalent

The lawyers at Robert Wayne Pearce, P. A. are well aware of the conflicts of interest of financial advisors who recommend to prospective clients that they withdraw funds from their 401(k) retirement plans and roll them over into an IRA account at the brokerage firm when they terminate their employment. The Financial Industry Regulatory Authority (FINRA) has finally woken up and given notice to all registered financial advisors and their employers that the pitch to move funds to IRA rollover accounts must be “fair and balanced;” two words that are foreign to many financial advisors.

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Puerto Rico Borrowing From Self Is Not A Good Sign For UBS Puerto Rico Investors

The latest news from Puerto Rico is that Government Development Bank (GDB) has borrowed $110 million from the State Insurance Fund (SIF) for its liquidity needs. The GDB President attempted to put a positive spin on the loan as achieving two objectives, “increasing GDB’s liquidity and improving the cash flow of SIF,” but borrowing from Peter to pay Paul is never a good strategy, even for a legitimate government. Puerto Rico is ostensibly seeking short-term deals to raise cash as it waits for conditions to improve in the US municipal bond market but the problem is with the Puerto Rico bond market and its economy. Noteworthy is the fact that the GDP still had to pay 8% annually for the loan and then pay it all back in less than 6 years. If 8% is the going rate within the government intra-agency borrowing what are the lenders on the outside going to charge the territory?

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Edward Scro Permanently Barred by FINRA for Unsuitable Recommendations To Elderly Customers

Edward Francis Scro, a former Registered Representative of the now un-registered financial advisory company NelsonReid, Inc., was permanently barred by the Financial Industry Regulatory Authority (FINRA) for making unsuitable recommendations to his elderly customers. According to FINRA’s findings, Mr. Scro, of Naples, Florida, advised his elderly customers, who needed a stable monthly income, to invest in risky, illiquid investments, sold primarily by Private Placement Memoranda (PPMs).

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Michael Barina Fined and Suspended by FINRA for Unsuitable Private Placement Recommendations

Longwood, Florida-based registered representative Michael Anthony Barina, employed by Altamonte Springs, Florida-based Merrimac Corporate Securities, Inc., submitted a Letter of Acceptance, Waiver and Consent in which he consented to, but did not admit to or deny, the Financial Industry Regulatory Authority’s (FINRA) sanctions and findings that he recommended an investment in a private placement investment pool without sufficiently understanding the entity’s investment strategy or its parameters. FINRAs findings stated that the entity’s investment strategy included investing up to 25% of its assets in a single security and engaging in options trading. According to FINRA, Mr. Barina allegedly “lacked a reasonable basis to believe that the entity was a suitable investment for the customers,” thereby making an unsuitable recommendation.

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More Downgrades Loom For PREPA and More Losses For UBS Puerto Rico Investors

Standard and Poor’s, Fitch Ratings and Moody’s ratings services have placed Puerto Rico’s general obligation bonds credit rating on negative watch which meant the next step was to downgrade Puerto Rico’s general obligation bonds to junk status. On Friday, Moody’s warned of another possible downgrade; this time of the Puerto Rico Electric Power Authority’s (PREPA) bonds. All three rating agencies have expressed concerns about the Island’s inability to access the market for refinancing and reasonable rates; the extent to which budget targets for the current fiscal year are being met; the instability in the performance of the Puerto Rico economy.

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Oppenheimer Fined By FINRA for Excessive Markups and Failure to Supervise

Oppenheimer & Co., Inc. (Oppenheimer) was fined $675,000 by the Financial Industry Regulatory Authority (FINRA) and ordered to pay over $246,000 in restitution to customers for charging unfair prices in municipal securities transactions and for failing to have an adequate supervisory system. FINRA also fined Oppenheimer’s head municipal securities trader, David Sirianni, $100,000 for his role in the excessive markups.

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Merrill Lynch Settles $131.8 Million Dollar Fraud Claim

The United States Securities and Exchange Commission (SEC) charged Merrill Lynch with false and misleading disclosures relating to two collateralized debt obligations (CDOs) and false records relating to a third CDO. Merrill Lynch settled the case for $131.8 million simultaneous with the filing of the SEC’s charges. According to the SEC, Merrill Lynch hid important facts from investors about a hedge fund known as Magnetar Capital, LLC and its involvement over the selection of collateral for the CDOs Octans I CDO Ltd. and Norma CDO I Ltd. Magnetar had undisclosed conflicts of interest. It bought the equity in the CDOs and hedged that equity position by shorting against the CDOs themselves.

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