March 2011 Archives

March 3, 2011

SEC Files Securities Fraud Lawsuit Against San Francisco Bay Area Financial Advisor

Thumbnail image for Thumbnail image for sec crest.bin.jpgToday, the Securities and Exchange Commission (SEC) filed securities fraud charges against Steven K. Kobayashi, a financial advisor working in the Walnut Creek, California, office of UBS Financial Services LLC. The SEC's complaint alleges that Kobayashi raised several million dollars through a fund called "Life Settlement Partners LLC" that invested in life settlement policies. Kobayashi allegedly bilked customers out of $3.3 million dollars in a scheme where he misappropriated customer funds to support an extravagant lifestyle that included expensive automobiles, large gambling debts and prostitutes. Kobayashi agreed to settle the SEC's charges against him without admitting or denying the allegations.

March 1, 2011

University of San Francisco's Investor Justice Clinic Helps Investor Recover $43,177 From Chase Investment Services LLC

school.jpgIt is a rare event when law students at the Investor Justice Clinic have the opportunity to participate in a securities arbitration case that goes all the way to hearing. The claim in question involved a Washington Mutual (WAMU) bank customer who was referred to the bank's on-site stockbroker. The stockbroker was not a bank employee, but an employee of the bank's stock broker affiliate. In this case, WAMU bank's broker affiliate was WAMU Investments Inc., which later became Chase Investment Services LLC.

The trouble started when a helpful WAMU bank teller noticed that the customer had a large amount of cash sitting in her account and recommended that she speak with a WAMU financial advisor who could get her a better return on her assets.

[See related blog posting: Investor Alert: Beware of Stockbrokers That Prey on Bank Customers]

After meeting with the customer, the broker understood that she planned to use the funds to purchase a condominium in the next year or so. Unfortunately for the customer, the broker recommended that she invest all of her money in the Franklin Income Fund (FCISX). Despite the fund's benign name, it is a fairly risky fund that seeks returns than are higher than a typical income fund. In the award, the arbitrator found that the broker's recommendation to invest in the Franklin Income Fund was unsuitable "based on the facts of her financial situation and objectives" and that the fund was "too volatile due to its concentration of low-rated bonds and sector risks." The arbitrator awarded the customer $43,773.41, which represented all of her losses in the fund. Congratulations to everyone at the USF Investor Justice Clinic who volunteered their time and energy on this matter!

About the USF Investor Justice Clinic

I am proud to have been associated with the University of San Francisco law school's Investor Justice Clinic as an adjunct professor and supervising attorney for over 5 years now. The clinic was established by Professor Robert Talbot as a way for law students to gain practical legal skills while, at the same time, helping small investors resolve stockbroker disputes through the securities arbitration program administered by the Financial Industry Regulatory Authority (FINRA). The clinic typically accepts small cases involving damages that are less than $25,000 and qualify for FINRA's "simplified arbitration" process. However, the clinic may accept larger cases if the investor is unable to find an attorney who will accept the case. After the recent market meltdown, the students at the clinic have been busy helping investors on a wide variety of interesting and sometimes challenging cases.