May 2010 Archives

May 28, 2010

FINRA Files Complaint Against Thomas Weisel Partners LLC Over Sale of Auction Rate Securities (ARS)

Thomas Weisel Partners LLC based in San Francisco, California, was named in a securities fraud lawsuit filed by the Financial Industry Regulatory Authority (FINRA) alleging that the firm and the head of its fixed income desk, Stephen Henry Brinck Jr., sold $15.7 million worth of auction rate securities (ARS) to customers out of the firm's own accounts without their customers' knowledge or consent. FINRA's complaint further alleges that, after "stuffing" customer accounts with ARS, the firm gave false and misleading information to its customers about the transactions in an attempt to have the customers forfeit their right to take any legal action against the firm. (FINRA Case #2008014621701).

May 24, 2010

IMH Secured Loan Fund IPO: Management Wants to Come Out of Hibernation

My securities law firm represents several IMH investors, some of them unaccredited investors who never should have been allowed to purchase the fund in the first place. A large percentage of these investors purchased the IMH Secured Loan Fund from brokers registered with Independent Financial Group. My clients want their money back as soon as possible. The quickest way to accomplish this was to cash out at the price of $1,000 per unit as part of the tender offer from MacKenzie Patterson Fuller (MPF) which expired on April 26, 2010. Admittedly, the $1,000 per unit price is a steep discount from the $4,406.86 per unit book value reported by IMH in the Form 10-K recently filed with the SEC for the period ending December 31, 2009. However, investors currently have no way to sell or redeem their units at this or any other price. The next opportunity for investors to sell their units may be as part of an initial public offering (IPO)--assuming the company's restructuring plan is approved by investors and the company can pull off a successful IPO under what may prove to be very challenging market conditions. IMH management anticipates that the initial IPO price will be set at a discount to the book value per share price.

There is at least one group lead by LGM Capital Partners LLC that is opposing IMH's plan and advising members to vote against the reorganization. On May 18, 2010, "The Committee to Protect IMH Secured Loan Fund" filed a statement with the SEC advising members to reject management's restructuring plan. Additional information was filed by the committee on May 20, 2010. Click here to download the committee's "talking points" which was intended for use by broker dealers when advising customers about IMH management's proposal.

Investors have until 5. p.m. on June 14, 2010, to cast their vote on management's proposal to restructure the company. If management's plan is approved, investors will be allowed to exchange one ownership unit for 220.3419 shares of Class B or Class C common stock. When investors cast their vote, they must elect whether to receive Class B stock, Class C stock, or some combination of the two. Those who do not make an election will automatically receive Class B common stock in exchange for their membership units.

Even investors who plan to vote against the restructuring plan
should make an election, just in case the plan is approved.

Many investors are understandably confused about the different classes of shares. Investors who elect to receive Class B shares will receive a fixed percentage of series B-1, B-2 and B-3 stock. Class B shares cannot be sold immediately after the IPO. Series B-1 shares can be sold 6 months after the IPO. Series B-2 shares can be sold 9 months after the IPO, while Series B-3 shares may not be sold until 12 months after the IPO. Class C shares, on the other hand, can be sold immediately after the IPO. Investors who want to liquidate their investment at the next available opportunity may want to convert some or all of their units into Class C shares, rather than Class B shares. Investors who can afford to hold onto their investment long-term and are optimistic about the company's prospects may want to choose Class B shares.

Below is a chart that was presented to investors during a video produced by IMH's management in support of the restructuring plan.

Click on image to enlarge.

manager's video chart1.JPG.

Click here for more blog postings about IMH Secured Loan Fund.

May 1, 2010

California Stockbroker Discipline Report for April 2010

warning_flag.jpgThe following information regarding broker misconduct and disciplinary activities taken against California stockbrokers was released by the Financial Industry Regulatory Authority (FINRA) in April 2010:

Heriberto Americo Artiga Sr. of Sylmar, California, formerly with Lincoln Financial Securities Corporation in Downey, California, was barred from association with any FINRA member in any capacity for engaging in private securities transactions involving the sale of $2.5 million of promissory notes to individuals that were promised to be risk-free, high yield investments.

Horus River Brown, formerly with Banc of America Investment Services in La Jolla, California, was barred from association with any FINRA member in any capacity for engaging in a private securities transaction outside the scope of his employment involving the investment of $200,000 in a convertible debenture that Brown promised would return 10 percent within ten months.

Keevin Lorenzo Gillespie of Santa Ana, California, formerly with National Securities Corporation in Irvine, California, was suspended from association with any FINRA member in any capacity for nine months for exercising control over elderly individuals' accounts and effecting excessive and unsuitable securities transactions in the accounts causing a total net loss of approximately $135,414 and generating gross commissions totaling approximately $182,820.26.

Scott Daniel Hendrickson of Yorba Linda, California, formerly with Ameriprise Advisor Services, was fined $10,000 and suspended from association with any FINRA member in any capacity for two years. Hendrickson was terminated by Ameriprise for misappropriation/conversion of customer funds and unauthorized trading.

Richard Alan Mechikoff Jr., formerly with Securities America in Fresno, California, was fined $10,000 and suspended from association with any FINRA member in any capacity for two years for making unauthorized and unsuitable recommendations resulting in the excessive concentration of speculative and volatile stocks in customer accounts.

William Frederick Nord, formerly with Morgan Stanley in Newport Beach, California, was fined $2,500 and suspended from association with any FINRA member in any capacity for 10 business days for settling a customer's complaint by paying the customer and agreeing to lower commission rates on the customer's future stock purchases without his member firm's knowledge or approval.