If you have lost money in the stock market due to fraud, misrepresentation, negligence, or for other reasons, we can help you. We have successfully recovered over $250 million in FINRA securities arbitrations.*
Need Legal Help? Contact Us. Call +1 (888) 997-9956
In 2009, a former Banc of America Investment Services (“BAIS”) broker filed an arbitration claim against the firm, alleging that BAIS improperly promoted sales of risky products, including Collateralized Debt Obligations (“CDOs”), to its customers. According to the Complaint, BAIS “engaged in fraudulent practices which were in conflict with its investment clients, particularly with…CDOs.” When the broker voiced his concerns over the sales of the CDOs, the Complaint alleges that he was constructively terminated. Moreover, the Complaint alleges that “upper level BAIS management gave specific instructions to its employees to conceal the fraud associated with all of BAIS’s Collateral Debt Obligation investments including but not limited to failing to secure collateral; fraudulent overvaluing of collateral; and concealing puts related to derivative provisions in the investments.”
CDOs and asset backed securities often carry significant risks, and can be speculative and illiquid. Under Notice to Members 03-71, which addresses sales of non-conventional investments (“NCIs”) like asset backed securities, “NCIs often have complex terms and features that are not easily understood…Given the complex nature of NCIs and the potential for customer harm or confusion, members are cautioned to ensure that their sales conduct procedures fully and accurately address any of the special circumstances presented by the sale of NCIs. Additionally, NASD is concerned that investors, particularly retail investors, may not fully understand the risks associated with these products.”
Further, under NASD Rule 2310, brokerage firms are required to provide their customers with suitable recommendations in light of their other security holdings and financial situation and needs. Moreover, financial advisors are required to conduct adequate due diligence before recommending an investment product to their customers. Due to the risks associated with CDOs and asset-backed securities, these investment products were unsuitable for many customers.