SLCG in the News

SLCG's research and testimony frequently results in press coverage and awards, decisions or orders.

 


Reuters, May 7, 2018 - "FINRA arbitration claims surge on Puerto Rico bond losses, worsened by Hurricane Maria"

By Richard Satran of Thomson Reuters Regulatory Intelligence.
Arbitration claims filed with the Financial Industry Regulatory Authority have surged from customers who lost money in the fiscal crisis that hit Puerto Rico debt over the past half-decade. The increase in part reflects a resumption of FINRA hearings after a hurricane crippled the U.S. island territory's infrastructure and led to a halt in processing cases.

The number of arbitration claims jumped 45 percent in the first quarter, according to FINRA statistics. The total of 1,152 new filings puts FINRA on a pace for the highest number of cases filed since the post-financial crash. In addition to the Puerto Rico case, firms also were starting to be hit by a rising number of claims related to market volatility, especially in VIX and other volatility products.

Most of the increase came from customer complaints over suitability and concentrated sales of municipal bonds issued by Puerto Rico. The number of municipal bond-related cases tripled in this year's first quarter to 406 from 132 in the prior year's quarter.

The U.S. island territory had been mired in a multi-year recession that was capped with the largest municipal bankruptcy filing in U.S. history last year after the territory fell behind on repaying its $70 billion in bond debt.

Maria makes matters much worse
The fiscal crisis deepened last September as the island was slammed by Hurricane Maria, one of the worst Atlantic storms in recent history, which caused extended power outages and inflicted billions of dollars in damages. FINRA declared a stay on actions as it scrambled to continue hearings and complaint processes in the storm's aftermath.

The Puerto Rico debt crisis, which unfolded over the past five years, has spiraled into one of the largest recovery efforts by customers suing brokers over losses.The more than 2,500 claims have continued to rise despite efforts by FINRA to set up hearings on an expedited manner. But the rising number of cases filed has outpaced FINRA's efforts to streamline the process.

"Arbitration filings against brokerage firms in Puerto Rico have increased dramatically since 2012," said report by the Securities and Litigation Consulting Group. The island which accounts for less than one percent of the US economy has accounted for more than a third of overall customer claims in the U.S. market, the recently updated report said.

More cases on the way
The consulting firm's chief executive officer, Craig J. McCann, said in comments emailed to Regulatory Intelligence, "There were more cases filed in 2017 than in 2016, and I am certain more cases will be filed in 2018 than were filed in 2017. Far from abating, the new filings and backlog of filings in PR are both increasing."

The largest issuers of bonds in Puerto Rico were UBS and Santander. Bank of America's Merrill Lynch also has had an active presence in the difficult market. The island issued tens of billions of largely tax-free bonds to fund development plans for the island and promote industry, and firms sold them as individual bonds or in funds that used leverage. The new issues fell to steep losses amid concern over repayment as a recession enveloped the island and devastated its tourist trade. But other factors were at play in boosting FINRA arbitrations. FINRA also reported a 40 percent rise in intra-industry claims in which Puerto Rico's problems did not play a large role. Industry sources said market volatility cases ticked higher.

While the recent breakdown of the broker hiring protocol last year was not seen having much of an impact on the flow of cases, there were initial signs such cases may be on the upswing. The number of defamation in libel or slander jumped 50 percent. Defamation shows up frequently in legal fights between firms and brokers moving to new companies.

The surge in new cases so far this year has led to a rising number of open cases after nearly a decade in which FINRA was steadily reducing the number of arbitrations from the financial crash. FINRA has been whittling down the total from the 7,000 in 2009, the peak year for arbitration claims filed.

The industry self-regulator cancelled all actions in September as Hurricane Maria led to the closing of many businesses and hearing officers and participants in arbitration were unable to find lodging and meeting rooms for hearings. FINRA resumed those cases in December.

Richard Satran is a financial journalist covering daily and emerging issues for Thomson Reuters Regulatory Intelligence.



The Wall Street Journal, March 22, 2017 - "What You Won't Learn From One Wall Street Watchdog Report"

Heather Gillers' "What You Won't Learn From One Wall Street Watchdog Report" Wall Street Journal story reports on a problem SLCG identified, illustrated by recent arbitration filings in Puerto Rico. Her article cites SLCG's analysis BrokerCheck records showing settlements and pending cases on individual broker's BrokerCheck reports not listed on the brokerage firm' BrokerCheck reports even though it is typically the firm not the individual broker who is sued. Craig McCann, Mike Yan and Chuan Qin are the principal authors of the study "Puerto Rico Securities Arbitration Report" available here. Their findings are related to broader reported in the "How Widespread and Predictable is Stock Broker Misconduct?" available here.



Market Watch, January 19, 2017, "Opinion: Borrowing its way out of trouble, Puerto Rico sinks"

Market Watch's "Opinion: Borrowing its way out of trouble, Puerto Rico sinks," by Elliot Blair Smith highlights the causes of the Puerto Rico's financial debacle. The Article quotes Craig McCann on UBS's investing of their own investor's assets in pension debt and sales tax bonds that they underwrote.



Kiplinger, January 1, 2017, "Beware Pitches for High-Yielding CDs"

Kiplinger's "Beware Pitches for High-Yielding CDs" by Eleanor Laise reports on CDs promising high yields or capturing market upside, but many of these safe-sounding investments are loaded with risk. The article quotes Craig McCann on the complexity and limitations of such CDs.



Bloomberg|Quint, December 9, 2016, "Deutsche Bank May Have Rigged Index in Paschi Deal, Audit Shows"

Bloomberg's "Deutsche Bank May Have Rigged Index in Paschi Deal, Audit Shows" reports on a Deutsche Bank internal audit report showing banker abuse of benchmarks, amid accusations of a widespread effort to rig rates for financial gain. The article quotes Craig McCann on the complexity and lack of transparency of these types of products to investors.



Financial Times, July 29, 2016, "Fears grow over Wall St's appetite for securities-based lending"

The Financial Times continues to cover the substantial increase in securities-based lending to customers of broker-dealers. Lending has become the primary focus of sales and marketing efforts at retail wirehouses like Merrill Lynch, Morgan Stanley and UBS. Paul Meyer, who has written extensively on the investor protection risks posed by these loans, is quoted today by the Financial Times cautioning about the risks associated SBLs. The article is available here.



AdvisorHub, June 20, 2016 - "Spy Novelist Who Claimed Deception by Morgan Stanley Wins $3.6 Million"

Mason Braswell's "Spy Novelist Who Claimed Deception by Morgan Stanley Wins $3.6 Million" reports on the financial harm an investor incurred when his broker overstated the value of his investments over a three-year period. Dr. O'Neal testified on liability and damages for the Claimant.



FinancialPlanning.com June 8, 2016 "Commissions exposed, adviser stops selling nontraded REITs"

Ann Marsh's "Commissions exposed, adviser stops selling nontraded REITs" in FinancialPlanning.com available here discusses SLCG's non-traded REIT research. The article illustrates how disclosing commissions and their impact on the purchase date value of a nontraded REITs helps disinfect this odious business.



The Wall Street Journal, April 22, 2016 - "Is Your Broker Good or Bad?"

Jason Zweig's "The Intelligent Investor: Is Your Broker Good or Bad?" in this weekend's Wall Street Journal reports on recent published literature on broker misconduct. His article cites SLCG's recently completed analysis of 1.2 million BrokerCheck records. Craig McCann, Mike Yan and Chuan Qin are the principal authors of the study. Their findings are reported in How Widespread and Predictable is Stock Broker Misconduct?



The Wall Street Journal, February 5, 2016 - "The Oil Rout's Surprise Victims"

Jason Zweig's "The Intelligent Investor: "The Oil Rout's Surprise Victims" in this weekend's Wall Street Journal discusses the losses caused by falling oil prices through retail structured products linked to crude oil prices, and to indexes and ETFs of oil and gas producing companies. The article quotes Craig McCann on the complexity of these products and their use as a focused bet rather than as part of a diversified investment strategy.



Financial Times, September 3, 2015 - "Market woes prompt regulator to warn on securities-based loans"

Ben McLannahan and Joe Rennison's "Market woes prompt regulator to warn on securities-based loans" quotes SLCG's Paul Meyer on the conflicts of interest involved in brokerage firms' extension of securities-based loans. Paul is quoted as saying "While securities-based lending is a low risk and very profitable business for the broker-dealer, the same cannot be said for the borrower. Broker-dealer lending creates conflicts of interest, saddling the customer with risks and potential long-term consequences he or she may not fully understand until the next bear market arrives." Paul's bio is available here and his paper on securities-based lending is available here.



Neue Zurcher Zeitung (The New Zurich Times), August 23, 2015 - "UBS's Costly Puerto Rican Adventure"

Sophie Schimansky's "UBS's Costly Puerto Rican Adventure" reviews the UBS debacle in Switzerland's largest German-language newspaper. The article can be downloaded here. The article quotes SLCG's Craig McCann (bio here) on the devastating impact UBS's conflicted sale of closed end funds and on the high likelihood that additional arbitrations will continue to be filed for many years to come. For a quick summary of SLCG's research into the UBS Puerto Rico click UBS Puerto Rico's Bond Fund Debacle: What We Know so Far.



The Wall Street Journal, August 11, 2015 - "Puerto Rico Investors Win Relief From UBS"

Mike Cherny's "Puerto Rico Investors Win Relief From UBS" in the Wall Street Journal reports on a string of arbitration wins by UBS PR customers over the sale of leveraged closed end bond funds. The WSJ article cites SLCG's analysis of the UBS PR funds and quotes Craig McCann.



Reuters June 9, 2015 - "Non-traded REITs cost investors $50 billion: consultant"

Ross Kerber and Suzanne Barlyn's "Non-traded REITs cost investors $50 billion: consultant" reports the result of SLCG's non-traded REIT research. In "An Empirical Analysis of Non-Traded REITs" (paper available here), Brian Henderson, Joshua Mallett, and Craig McCann found that the non-traded REIT industry has transferred at least $45.5 billion in wealth from investors to sponsors and the brokerage industry. The first 41 non-traded REITs had cost investors $25.5 billion in lost wealth and 40 additional non-traded REITs which had updated their NAVs had cost investors another $20 billion in lost wealth. In "Fiduciary Duties and Non-traded REITs" (paper available here), Craig McCann points out that no advisor with fiduciary duties could recommend a non-traded REIT.



Federal Judge Hands Down 10-Year Sentence To Former Chief Accounting Officer For Beazer Homes USA, Inc.

In April 2015, a federal judge in Charlotte, NC handed down a 10-year prison sentence to the former Chief Accounting Officer of Beazer Homes for accounting fraud and obstruction of justice. Dr. O'Neal testified about the losses Beazer Homes shareholders incurred due to the fraud. The Judge adopted Dr. O'Neal's event-study calculations and rejected the competing analysis of defendant's expert witness. In criminal cases, the magnitude of the losses caused by the criminal activity in large part determine the severity of the punishment. The US Department of Justice writes that "the Court emphasized that its sentence was intended to deter others because our 'markets depend on the integrity of accounting officers.'"



Reuters, February 18, 2015 - "Interactive Brokers must pay $667,000 for portfolio selloff mishap -panel"

In "Interactive Brokers must pay $667,000 for portfolio selloff mishap -panel" Suzanne Barlyn reports on a $667,000 FINRA award against Interactive Brokers arising out of its alleged failure to auto-liquidate a hedge fund account in a commercially reasonable manner. The article quotes Craig McCann who testified about the defects of IB's auto-liquidation procedures and on damages at the final hearing.



Wall Street Journal, January 14, 2015 - Katy Burne and Aaron Kuriloff "Regulators Want Data on Bond-Trade Fees, SEC, Others Scrutinize Markups Paid by

In Regulators Want Data on Bond-Trade Fees, SEC, Others Scrutinize Markups Paid by Retail Bond Investors Katy Burne and Aaron Kuriloff report on continued efforts by regulators to improve transparency in the municipal bond market and thereby reduce the extraordinary undisclosed markups and markdowns dealers charge retail investors. The article cites SLCG's comprehensive study of municipal bond markups, Using EMMA to Assess Municipal Bond Markups.



Chicago Tribune, December 26, 2014 - Heather Gillers "Some have recouped millions from risky type of debt that plagues CPS"

In "Some have recouped millions from risky type of debt that plagues CPS," Heather Gillers reports on the success some municipal issuers have had in recovering losses suffered as a result of following investment banks advice to issue auction rate securities and simultaneously enter into interest rate swaps rather than issue fixed rate debt. Issuers like the Chicago Public School System suffered large losses when the ARS clearing rates rose relative to the floating rate leg of the swap contracts and the mark to market value of the swaps dropped dramatically. The article quotes Craig McCann about the defects of synthetically fixing rates suing this combination of ARS and derivatives.



Bloomberg TV, December 2, 2014 - "The Growth of Non-traded REITs"

SLCG's non-traded REIT research is cited in Deirdre Bolton's interview of Bob Rice of Tangent Capital Partners on the growth of illiquid, high-cost non-traded REITs. The non-traded REIT fees discussed in the Bloomberg TV segment is excerpted from Table 2 in our "A Primer on Non-Traded REITs and other Alternative Real Estate Investments" available here.



Bloomberg News, October 27, 2014 - "SEC's Cross Says Shine a Light on Tax-Free Market: Muni Credit"

In the Bloomberg News article "SEC's Cross Says Shine a Light on Tax-Free Market: Muni Credit" William Selway and Brian Chappatta quote Craig McCann and SLCG's municipal bond research for the proposition that municipal bond investors pay as much as $1 billion in excessive markups and markdowns due to a lack of disclosure.



Bloomberg News, August 5, 2014 - "Muni Regulators May Force Brokers to Disclose Bond Trade Prices"

William Selway quotes Craig McCann and SLCG's municipal bond research in the Bloomberg News article "Muni Regulators May Force Brokers to Disclose Bond Trade Prices"



Wall Street Journal, July 12, 2014 - "Five Popular-but Dangerous-Investments for Individuals"

Kirsten Grind's "Five Popular - but Dangerous - Investments for Individuals" discusses five retail investments, including non-traded REITs, leveraged and inverse ETFs and complex structured products, investors should avoid. The article quotes SLCG's Craig McCann.



Reuters, June 30, 2014 - "Exclusive: South Carolina jury awards $8.1 million to investor who was misled by BB&T"

In "Exclusive: South Carolina jury awards $8.1 million to investor who was misled by BB&T" Suzanne Barlyn reports on an $8.1 million jury verdict arising out of BB&T's recommendation of a variable prepaid forward contract to Frank Maybank. The article quotes Craig McCann who testified about the defects of variable prepaid forwards and on damages at the trial.


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Wall Street Journal, June 16, 2014 - "Nontraded REITs Are Hot, But Have Plenty of Critics"

Robbie Whelan's "Nontraded REITS are Hot, But Have Plenty of Critics" reports on the issues with nontraded REITS. The article quotes Dr. Craig McCann on the problematic issues surrounding nontraded REITS.



NY Post, April 4, 2014 - "Teacher says UBS broker's advice lost her $400,000"

Josh Kosman's "Teacher says UBS broker's advice lost her $400,000" reports on the financial losses faced by an investor in UBS Puerto Rico bond funds. The article quotes Dr. Edward O'Neal on the concentration of these funds.



HuffingtonPost, March 26, 2014 - "'Learning' From Timothy Sykes"

Dan Solin's "'Learning' From Timothy Sykes" explores how to do due diligence on the validity of Timothy Sykes trading methods and success claims. The article quotes Dr. Edward O'Neal on what due diligence he would do on Sykes' method.



Bond Buyer, March 25, 2014 - "Problem Puerto Rico Bond Trades Erased, Survey Shows More Troubled Sales"

Kyle Glazier's "Problem Puerto Rico Bond Trades Erased, Survey Shows More Troubled Sales" reports on dozens of cancelled Puerto Rico bond deal sales to customers that were "erased from EMMA or altered as if they never occurred." The article quotes Dr. Craig McCann on the MRSB's failure to take its "investor protection mandate seriously."



MarketWatch, March 4, 2014 - "Puerto Rico's travails hit muni bond firm that bet big"

Ben Eisen's "Puerto Rico's travails hit muni bond firm that bet big" of MarketWatch cites SLCG's blog post written by Craig McCann and Carmen Taveras on their work on the Oppenheimer Rochester Funds.



Reuters, December 12, 2013 - "COMPLY-U.S. Regulator Intensifies Scrutiny of Fee-Based Accounts"

Suzanne Barlyn's "COMPLY-U.S. Regulator Intensifies Scrutiny of Fee-Based Accounts" quotes Paul Meyer on the concerns of fee-based accounts and commission-based accounts.



Bloomberg News, November 21, 2013 - "Sales of Callable Stock-Tied Notes Soar on Markets as Risks Loom"

Dr. Tim Husson discussed the properties and risks of autocallable structured products in Kevin Dugan's Bloomberg News report titled "Sales of Callable Stock-Tied Notes Soar on Markets as Risks Loom." Dr. Husson notes the reinvestment risk that can arise from notes that are called back by the issuer.



SEC Press Release - August 15, 2013 "Michael Piwowar Sworn in as SEC Commissioner"

The U.S. Securities and Exchange Commission announced the swearing in of former SLCG Principal as a Commissioner nominated by President Obama replacing Commissioner Troy Paredes. Dr. Piwowar was an employee of SLCG after leaving the SEC's Office of Economic Analysis in 2006 until joining President Bush's Council of Economic Advisers in 2008. The SEC's Press Release can be found here: "Michael Piwowar Sworn in as SEC Commissioner."



Bloomberg News, August 1, 2013 - "Market-Linked Certificates of Deposit Overpriced, Report Says"

Kevin Dugan's "Market-Linked Certificates of Deposit Overpriced, Report Says" of Bloomberg News interviewed Dr. Husson about SLCG's recent whitepaper on structured (or market-linked) certificates of deposit. They explain the results of the study, which indicate that structured CDs are often overpriced and that the market-linked component is often of little value to investors.



CNN Money, July 9, 2013 - "Libor moving to NYSE Euronext"

Alanna Petroff reports that "Libor moving to NYSE Euronext" in CNNMoney.com. Dr. Tim Dulaney was quoted as saying that the move to NYSE Euronext was unlikely to restore confidence in LIBOR unless it was accompanied by fundamental change in the calculation methodology.



Bond Buyer, June 11, 2013 - "Study Claims Billions of Dollars of Excessive Muni Markups"

Kyle Glazier's "Study Claims Billions of Dollars of Excessive Muni Markups" summarizes the results of SLCG's comprehensive municipal bond markup study available here. We estimated that brokerage firms and underwriters charged $1 billion a year in excessive markups leading to higher borrowing costs for municipal issuers and lower returns for investors. Mr. Glazier's story led SIFMA's Michael Decker to criticize our work in a June 18, 2013 letter to the Bond Buyer editor, Fatal Flaws in Markup Research Paper, available here and Craig McCann's June 25, 2013 response, Rebuttal to Markup Report Criticisms available here.



The Wall Street Journal, June 7, 2013 - "The Intelligent Investor: What's Eating Your Munis?"

Jason Zweig's "The Intelligent Investor: What's Eating Your Munis?" in this weekend's Wall Street Journal revisits excessive markups in the municipal bond market. His article cites SLCG's recently completed analysis of 20 million trades in long term municipal bonds between 2005 and 2013. Geng Deng and Craig McCann are the principal authors of the study. Their findings are reported in Using Emma to Assess Municipal Bond Markups.



Investment News, June 7, 2013 - "TIC Awards Show Brokers Still Grappling with Real Estate Bubble Fallout"

In "TIC Awards Show Brokers Still Grappling with Real Estate Bubble Fallout," Bruce Kelly of InvestmentNews discusses tenant-in-common (TIC) real estate securities with Dr. Tim Husson. Dr. Husson notes that even though TIC interests were mostly purchased before 2008, TIC investors are still struggling with the effects of these deals and several arbitration claims are still pending. To learn more about TIC interests, please see our blog posts and research paper.



Bloomberg News, February 7, 2013 - "Structured Note Rules May Fail to Resolve Confusion Over Pricing"

Kevin Dugan's "Structured Note Rules May Fail to Resolve Confusion Over Pricing" discusses the remaining obstacles to the efficacy of fair value estimations of structured products following the April 2012 sweep letter from the SEC. Dr. Tim Dulaney is quoted as saying that if you change your volatility assumptions...you could get a vastly different valuation. To read more about this story, feel free to visit our blog on Structured Product Issuers Under Pressure to Disclose Estimated Value.



The Wall Street Journal, January 26, 2013 - "How Apple Bit Bond Holders, Too"

Jason Zweig's "How Apple Bit Bond Holders, Too" in this weekend's Wall Street Journal describes the impact on investors in Apple-linked structured products of the decline in Apple's stock price from $700 in September 2012 to under $450 in January 2013. His article relies heavily on SLCG's structured products research including The Rise and Fall of Apple-linked Structured Products. All eight SLCG's working papers on structured products can be found here. SLCG's database of 15,000 free research reports equity-linked structured products available here includes 775 reports on Apple-linked products.



The Wall Street Journal, December 28, 2012 - "Bond Funds: The Downside"

Kirsten Grind's "Bond Funds: The Downside" reports on the recent high returns earned by some short term bonds funds. These higher yielding funds tend to hold bonds with longer maturities and more credit risk than the bonds which dominate lower yielding bond funds' portfolios. The article quotes Craig McCann pointing out that the bond funds that have the highest yields in 2012 will suffer the largest losses if credit spreads widen again as they did in 2008. The higher risk taken by some bond funds to boost yields in comparison to their peers is the subject of our What Does a Mutual Funds' Term Tell Investors? and our What Does a Mutual Funds' Average Credit Quality Tell Investors?



The Wall Street Journal, December 1, 2012 - "The Great Yield Gamble"

Ben Levisohn and Joe Light's "The Great Yield Gamble" reports on the riskier investments that offer higher yields, such as high yield bond funds and structured products. Some of these investments are more complicated and riskier than necessary. The article quotes Craig McCann on the merits of reverse-convertible structured notes. Learn more about structured products from SLCG's free database of structured product analysis.



Reuters, October 23, 2012 - Appeals court reinstates Morgan Keegan ruling

"The U.S. Court of Appeals for the 5th Circuit ruled that a district court's decision to throw out the arbitration award was made in error, according to an opinion released on Tuesday.

U.S. District Court Lynn Hughes in Houston ruled in September, 2011, that the arbitration ruling should be thrown out because, in part, it was obtained through the alleged 'fraudulent' testimony of Craig McCann, an expert witness and former U.S. Securities and Exchange Commission economist.

The federal appeals panel, however, noted that there was a 'total absence of any evidence' to support that finding. The evidence 'supports nothing more than a conclusion that a member of Dr. McCann's staff made a calculation error that he did not discover until after he testified,' the court wrote.

..." For the full Reuters story click here.



The Wall Street Journal, July 21, 2012 - "New Product Offers Stock-Like Returns With Less Risk"

"New Product Offers Stock-Like Returns With Less Risk" by Kirsten Grind reports on a new type of investment from Eaton Vance called eUnits that combine a unit investment structure with a buffered plus payoff at maturity. The article quotes SLCG's structured products research and Craig McCann on the merits of eUnits. Learn more about structured products from SLCG's free database of structured product analysis.



Reuters, February 14, 2012 - Wall Street Fights Back Against Expert Witness in Lawsuits

Suzanne Barlyn's "Wall Street Fights Back Against Expert Witness in Lawsuits" reports on largely unsuccessful efforts by the financial services industry to lessen the impact of SLCG's Craig McCann on securities litigation.



American Banker, February 10, 2012 - B of A Subpoenaed by Massachusetts Over CLOs

Allison Bisbey's "B of A Subpoenaed by Massachusetts Over CLOs" reports on Massachusetts subpoena of Bank of America over two CLOs issued by BofA in 2007 - LCM VII and Bryn Mawr II. SLCG first publicized the problems with these two CLOs ten days earlier in CLOs, Warehousing, and Banc of America's Undisclosed Losses. Secretary Galvin apparently read and liked SLCG's January 31, 2012 press release about these two CLOs.

Recent Award
Hayes v Banc of America Securities - $1.4 million CLO Award



The New York Times, February 5, 2012 - "A Wipeout That Didn't Have to Happen"

Gretchen Morgenson's "A Wipeout That Didn't Have to Happen" reports on research done at SLCG into collateralized loan obligations (CLOs) underwritten by Banc of America, Citigroup and other firms in 2007 which resulted in a $1.4 million FINRA award in the case of Hayes v Banc of America Securities. In Collateralized Loan Obligations, Warehousing, and Banc of America's Undisclosed Losses, Tim Husson, Craig McCann, and Olivia Wang document two examples of CLO offerings in which Banc of America appears to have transferred at least $35 million of losses to investors in July 2007 and which ultimately led to approximately $150 million in losses. Banc of America Securities sold one of the problematic CLOs they identified, LCM VII, to Mr. Hayes.



The Wall Street Journal, April 13, 2011 - "Citigroup Loses Muni Case"

"Citigroup Loses Muni Case" reports on the $54.1 million FINRA award in the case of Hosier et al v Citigroup Global Markets, Inc. involving Citigroup's MAT/ASTA family of leveraged municipal bond hedge funds. SLCG's "Leveraged Municipal Bond Arbitrage: What Went Wrong?" explains the fundamental flaws in the investment strategy underlying these risky hedge funds. The award is the largest securities arbitration award to individual claimants. The next largest award involving Citigroup's hedge funds was the $6.4 million Berghorst v CGMI award from earlier this year. Craig McCann of SLCG testified on behalf of the claimants in both cases.



The Wall Street Journal, March 31, 2011 - "Complex Bond Faces Regulators' Scrutiny"

"Complex Bond Faces Regulators' Scrutiny" reports on ongoing SEC and FINRA investigations into the sales of reverse convertibles. The article quotes Craig McCann on inadequate risk disclosures and reports on some statistics from SLCG's free database of structured product analysis.



The Wall Street Journal, February 5, 2011 - "Preferred Stock: Are Those Juicy Yields Worth the Extra Risk?"

Dr. Edward O'Neal discussed the risks of preferred stocks in Jason Zweig's Intelligent Investor column, Preferred Stock: Are Those Juicy Yields Worth the Extra Risk?, for the Wall Street Journal. Dr. O'Neal notes that preferred stocks can be riskier than junk bonds, even in bull markets.



The Wall Street Journal, January 11, 2011 - "Schwab Pays in YieldPlus Settlement"

"Schwab Pays in YieldPlus Settlement" reports on Charles Schwab Corp.'s $119 million settlement with the SEC over its marketing of the YieldPlus fund as an ultra short bond fund despite the heavy concentration of private label mortgage back securities, it's high and misrepresented average maturity and low and misrepresented average credit quality. The SEC Complaint against the firm and the Complaint against Kim Daifotis and Randall Merk closely track the results of SLCG's independent research into YieldPlus. See YieldPlus Risk and What Does a Mutual Fund's Average Maturity Tell Investors?



The Wall Street Journal, November 13, 2010 - "Structured Notes: Not as Safe as They Seem"

"Structured Notes: Not as Safe as They Seem" discusses the growth in sales of structured products in 2010. The article quotes Craig McCann on the mispricing of structured products in their offerings and mentions SLCG's free database of structured product analysis.



The New York Times, October 9, 2010 - "It's Not Nice to Mess With J.R."

"It's Not Nice to Mess With J.R." reports on the $11.6 million award Larry Hagman, who played J.R. in the hit television series Dallas, won against Citigroup. Paul Meyer testified on behalf of Mr. Hagman at the arbitration hearing. The full award can be found here.



The Wall Street Journal, September 25, 2010 - "How Safe Is Your Bond Fund?"

"How Safe Is Your Bond Fund?" describes the dramtatic impact of changes in how Morningstar calculates the average credit quality of bond mutual funds. Morningstar lowered the reported credit quality of more than half the bond funds it covered by at least one whole letter grade with many being reduced by two whole letter grades or more. The change in Morningstar's methodology and FINRA's prior admonishment to the industry to stop using this statistic until its glaring flaws were corrected was prompted by SLCG's study "What Does a Mutual Fund's Average Credit Quality Tell Investors?"



The Wall Street Journal, July 27, 2010 - "Crisis-Era Munis Haunt Wall Street"

"Crisis-Era Munis Haunt Wall Street" reports on the continued havoc caused by leveraged municipal bond arbitrage hedge funds which had been marketed to retail investors as alternatives to unlevered municipal bond portfolios. SLCG's "Leveraged Municipal Bond Arbitrage: What Went Wrong?" explains the fundamental flaws in the investment strategy underlying these risky hedge funds.



New York Times, May 21, 2010 - "'100% Protected' Isn't as Safe as It Sounds"

"'100% Protected' Isn't as Safe as It Sounds" cites SLCG research on the value of Lehman Brothers Principal Protected Notes sold to retail investors.



Bloomberg, May 17, 2010 - "JPMorgan's 64 Percent Note Shows Risks of Reverse Convertibles"

"JPMorgan's 64 Percent Note Shows Risks of Reverse Convertibles" cites SLCG's research into reverse convertibles and quotes Craig McCann on JP Morgan's reverse convertible linked to Tivo stock.



Los Angeles Times, April 26, 2010 - "Schwab case shows pain of a bond market's collapse on small investors"

"Schwab case shows pain of a bond market's collapse on small investors" quotes Craig McCann on the holdings in Schwab's YieldPlus mutual fund portfolio.



The Wall Street Journal, April 15, 2010 - "About Those Alleged Short-Term Funds..."

"About Those Alleged Short-Term Funds... Some Go Long on Bonds, Risk-Study" reports on newly issued SLCG study that shows that losses in 2008 in mutual funds marketed as short term bond funds occurred because the funds in fact held mostly very long term bond portfolios.



Investment News, April 7, 2010 - "FINRA, SEC and state regulators swarm Morgan Keegan with fraud charges"

"FINRA, SEC and state regulators swarm Morgan Keegan with fraud charges" quotes Craig McCann on damning internal documents released by regulators as they announce their actions against Morgan Keegan.



Reuters, March 29, 2010 - "Complex notes with principal guarantees spring back"

"Complex notes with principal guarantees spring back" quotes Craig McCann on the resurgence of principal protected notes less than two years after the collapse of Lehman Brothers caused billions of dollars of losses in securities that were supposed to be safe.



The Sacramento Bee, Friday, Nov. 13, 2009 - "SMUD sues Wall St. firms over alleged bid rigging"

"SMUD sues Wall St. firms over alleged bid rigging" quotes Craig McCann on the impact of alleged bid rigging by Wall Street firms in the municipal derivatives market.



Securities Litigation and Consulting Group, Inc. Releases Leveraged Municipal "Arbitrage" Study

Securities Litigation and Consulting Group, Inc. ("SLCG") has issued an updated study on leveraged municipal bond hedge funds -- including Citigroup's MAT 3, MAT V and Falcon Strategies. The study reports that more than 35 similar hedge funds, including Stone & Youngberg Municipal Advantage Fund, 1861 Capital Management, Gem Capital, Rockwater Hedge Fund, LLC, and Blue River Asset Management Main Muni Fund were mis-marketed to investors as high yield, low risk alternatives to traditional municipal bond funds entitled "Leveraged Municipal Bond Arbitrage: What Went Wrong?"



Birmingham Business Journal, May 1, 2009 - "Morgan Keegan suits loom large over Regions Financial"

"Morgan Keegan suits loom large over Regions Financial" quotes Craig McCann of SLCG on the inferior tranches of structured finance deals that dominated the RMK bond funds' portfolios.



Barron's, April 13, 2009 - "Designed to Deceive: Equity Indexed Annuities"

"Designed to Deceive: Equity Indexed Annuities" discusses SLCG research into equity-indexed annuities.



SLCG Announces Updated Regions Morgan Keegan Bond Fund Study

SLCG issued a press release today announcing the distribution of its study of six Regions Morgan Keegan bond funds (RMH, RHY, RMA, RSF, MKHIX and MKIBX) entitled "Regions Morgan Keegan: The Abuse of Structured Finance - Third Draft".



The New York Times, October 24, 2008 - Weighing an Investment That Promises No Risk

Ron Lieber's "Weighing an Investment That Promises No Risk" discusses the sales pitch used to sell high cost equity indexed annuities to older investors despite the poor performance of EIAs relative to liquid investments in stock and bond mutual funds. The article reports Craig McCann's research into and valuation of EIAs.



SLCG Announces Regions Morgan Keegan Bond Fund Study

SLCG issued a press release today announcing the distribution of its study of six Regions Morgan Keegan bond funds (RMH, RHY, RMA, RSF, MKHIX and MKIBX) entitled "Regions Morgan Keegan: The Abuse of Structured Finance".



NASAA Submits SLCG's An Economic Analysis of Equity-Indexed Annuities to the SEC

The North American Securities Administrators Association submitted an SLCG White Paper, An Economic Analysis of Equity-Indexed Annuities, authored by Dr. Craig McCann to the Securities and Exchange Commission with a comment letter in support of the SEC's proposal to extend the full protections of the federal securities laws - full and accurate disclosure of all material facts and fair dealing in sales practices - to purchasers of contracts. Read the rule.



SIFMA Calls SEC's Proposed Market Data Order "Fatally Flawed"

The Securities Industry and Financial Markets Association (SIFMA) commissioned SLCG to prepare an "Economic Study of Securities Market Data Pricing by the Exchanges." The study provides strong support for the assertion that the two dominant exchanges are exercising monopoly pricing power by charging fees for depth-of-book data that are significantly higher than the relevant costs associated with distributing the data.



The Securities and Exchange Commission Issues Equity-Indexed Annuities Rule Proposal

The Securities and Exchange Commission proposed a new rule which would clarify the status of equity-indexed annuities and would extend the full protections of the federal securities laws - full and accurate disclosure of all material facts and fair dealing in sales practices - to purchasers of contracts whose payoffs were more likely than not to vary with the performance of a security or index of securities. Read the rule. The public is invited to submit a comment on this rule proposal by September 10, 2008. Submit a comment.



Dateline NBC Investigates Equity-Indexed Annuities

Dateline NBC conducted an investigation into the sales of equity-indexed annuities industry including hidden-camera footage of seminars targeting seniors, industry training programs in-house sales calls. The resulting documentary was broadcast on April 13, 2008 and is available in 7 clips at www.msnbc.msn.com.



Trust & Estates: Custom Bond Valuations

Dr. Michael Piwowar and co-author Barry A. Nelson published their article "Custom Bond Valuations Can Save Clients Money" in the May 2008 issue of Trusts & Estates, the monthly journal for estate planning and wealth management professionals. They explain why individuals who use standard bond valuations based on institutional prices are paying unnecessarily high estate taxes. They show how custom bond valuations for estates containing retail-sized bond positions can generate significant estate tax savings.



Cornell University School of Law

On March 7, 2008, Dr. McCann presented to the Securities Law Clinic at the Cornell University School of Law on a variety of investment products including variable annuities, equity-indexed annuities and debt- and equity-linked structured products.



31st Annual Southwestern Securities Enforcement Conference

Dr. McCann participated in a panel discussion on variable and equity-indexed annuities at the 31st Annual Southwestern Securities Enforcement conference presented by the Securities and Exchange Commission and the Texas Securities Commission. Attendees included representatives from state and federal law enforcement and regulatory agencies.



Study: Mandatory Arbitration of Securities Disputes

Dr. O'Neal and attorney/author Dan Solin today released a statistical analysis of the results of the mandatory arbitration process during the 1995 - 2004 period. They assessed almost 14,000 NASD and NYSE arbitration cases and found that Claimant win rates and recovery amounts have declined significantly over time. Moreover, claimants fare more poorly in large cases and in cases against larger brokerage firms. Dr. O'Neal and Mr. Solin estimate that the expected recovery before legal fees and expenses in a large case against a top brokerage firm is only 12% of the amount claimed.



Press Release: Securities Arbitration Study

Investors Recovered Just 22 Cents on Dollar in 2004, Down From 38 Cents in 1998; Wins Dropped From 59 Percent in 1999 to 44 Percent in 2004, Lowest at Big Brokerages. To view the study, download it from the article: Mandatory Arbitration of Securities Disputes



Minimizing Longevity Risk

Dr. McCann presented in the New York Society of Securities Analysts (NYSSA) panel discussion, Minimizing Longevity Risk on the soundness of using general investments rather than special purpose insurance to fund possible future long term care expenses. He also presented some of his research on variable annuities, equity-indexed annuities and structured products to an audience of securities industry professionals.



Equity-indexed annuities

Scott Burns' column "Equity-indexed annuities sound good, but ..." in the Dallas Morning News, Boston Globe and other national newspapers reviews SLCG's research into equity-indexed annuities.



Arbitration Is a Tough Climb

Wall Street Journal - "Arbitration Is a Tough Climb: Some Ask if System Is Stacked Against Investors" extensively cites research undertaken by Dr. O'Neal on NASD and New York Stock Exchange arbitration awards from 1995 to 2004.



Annuities complaint sends up red flag

Sarasota Herald Tribune's "Annuities complaint sends up red flag" quotes Dr. McCann on equity-indexed annuities' costs and complexity in a story covering EIA-related litigation in Florida.



Class action litigation looms...

Crain's Investment News' "Class action litigation looms as new hurdle for EIA insurers" describes a recent ruling on class certification in an equity-indexed annuity class action against Midland National Life Insurance Co. in which Dr. McCann had testified.



Equity-indexed annuities

SLCG issues a press release announcing the release of its study of equity-indexed annuities, demonstrating the complexity and inferiority of costly equity-indexed annuities in comparison to portfolios of stocks and bonds.



Things to look for in '07

Humberto Cruz's column "Things to look for in '07" in the Chicago Tribune, Baltimore Sun and other national newspapers reviews SLCG's research into equity-indexed annuities.



Buying Index Funds Through Brokers...

St. Petersburg Times - "Buying Index Funds Through Brokers is Costly Study Shows." Cites research conducted by Dr. O'Neal that shows that brokers tend to push investors towards higher cost index funds.



Equity-linked structured notes

SLCG issues a press release announcing the release of its study of equity-linked structured notes.



Steering Investors to Sure-Fire Lower Returns

Los Angeles Times - "Steering Investors to Sure-Fire Lower Returns." Although one would expect using a professional advisor to improve an investor's performance, instead the investor pays a significant penalty," says Dr. O'Neal. "When investors used brokers they paid twice: First, they paid the broker; second, they paid a penalty in the form of higher fund fees."



Research on variable annuities...

Dr. McCann presented his research on variable annuities, equity-indexed annuities and structured products to the North American Securities Administrators Association's (NASAA) Attorney Investigator Training conference.



Indexed-Annuities: Too Good to be True?

Kiplinger's Retirement Report's "Indexed-Annuities: Too Good to be True?" quotes Dr. McCann on equity-indexed annuities' costs and complexity.



3 Retirement Deals You Can Do Without

Money Magazine's September 2006 issue "3 Retirement Deals You Can Do Without" quotes Dr. McCann on the complexity and cost of equity-indexed annuities.



Excessive fund fees

Dr. O'Neal was on a panel at the annual Institutional Investor meeting for Mutual Fund Counsel speaking about how to grapple with the issue of excessive fund fees.



Homework Key to Avoiding Investor Pitfalls

Washington Post - "Homework Key to Avoiding Investor Pitfalls" quotes Dr. O'Neal on the academic research demonstrating that mutual fund managers cannot consistently beat the market.



Citigroup Ruling May Embolden Affluent Investors

Wall Street Journal's "Citigroup Ruling May Embolden Affluent Investors," discusses in detail Dr. McCann's involvement in an arbitration proceeding in Cleveland, OH between a wealthy investor and Citigroup over client presentations made by its private client group.



Annuities With an S&P Return

Washington Post's "Annuities With an S&P Return" quotes Dr. McCann on the merits of equity-indexed annuities as a substitute for portfolios of stocks and bonds.



Lessons from U.S. Corporate and Municipal...

Dr. Piwowar co-presented "Lessons from U.S. Corporate and Municipal Bond Market Transparency Initiatives: Implications for Emerging Markets" to delegates at the U.S. Securities and Exchange Commission International Institute for Securities Market Development in Washington, DC.



Study riles advocates of equity index annuity

Crain's Investment News' "Study riles advocates of equity index annuity" features industry reaction to SLCG's 'An Overview of Equity-Indexed Annuities."



Secondary Transaction Costs

Dr. Piwowar presented "Secondary Transaction Costs in the Municipal and Corporate Bond Markets" to staff at the Commodity Futures Trading Commission (CFTC) in Washington, DC.



Broker Haggle Guide

"Broker Haggle Guide" cites research by Dr. O'Neal on the problems that multiple share class mutual funds cause for investors.



Spanning the Transparency Divide

Financial Times - "Spanning the Transparency Divide" extensively cites Dr. Piwowar's research on the benefits of introducing price transparency to the U.S. corporate bond markets.



NASDAQ Adds Four More Indexes

"NASDAQ Adds Four More Indexes." Because most investors have portfolios full of stocks on several exchanges, the Nasdaq-only index may not be that valuable as a benchmark, says Dr. O'Neal.



Transparency Could Save Investors $1B

Financial Times - "Transparency Could Save Investors $1 Billion a Year" features Dr. Piwowar's research on the benefits to investors and issuers from adding price transparency to the corporate bond market.



Lessons from U.S. Corporate Bond Market...

Dr. Piwowar presented "Lessons from U.S. Corporate Bond Market Transparency Initiatives and Implications for the European Union (EU) Markets in Financial Instruments Directive (MiFID)" at the European Central Bank (ECB) in Frankfurt, Germany.



...Bond Market Transparency Initiatives

Dr. Piwowar co-presented "U.S. Municipal and Corporate Bond Market Transparency Initiatives" to the Ontario Securities Commission in Ottawa, Canada.



Primuni's First, and So Far Only...

Bond Buyer - "Retail Focus: Issuer Official Says Primuni's First, and So Far Only, Deal Saved It $19,000" cites Dr. Piwowar's research on municipal bond market trading costs.



Fixed Income Markets in Montreal

Dr. Piwowar participated in the Bank of Canada Workshop on Fixed Income Markets in Montreal, Canada.



Employee Stock Options...

Dr. McCann presented "Employee Stock Options and Concentrated Stock Positions: What Not to Do to Protect Your Wealth," to the Union League Club of Chicago.



Survey Finds Hidden Trading Costs

Wall Street Journal - "Survey Finds Hidden Trading Costs" cites research conducted by Dr. O'Neal on the costs that investors in mutual funds incur when their mutual fund portfolio managers implement trading strategies. "That investors in actively managed funds incur portfolio trading costs that are over seven times that of index fund investors is another in the long line of reasons for investors to favor index funds," says Dr. O'Neal.



Bond Markets: Ripe

The Economist - "Bond Markets: Ripe" cites Dr. Piwowar's research on corporate bond market trading costs.



Groups Urge More Transparency in Corp. Bond...

CBS.MarketWatch.com - "Groups Urge More Transparency in Corporate Bond Market" cites Dr. Piwowar's research showing that price transparency in the corporate bond market results in lower trading costs.



Sting of scandal followed by lower fees...

Baltimore Sun - "Sting of scandal followed by lower fees for many mutual fund investors" quotes Dr. O'Neal on mutual fund fees: "Fees are one thing when investing in mutual funds that you can control. Performance is impossible to predict, but by choosing low-cost funds you are at least stacking the deck in your favor."



Mom and Pop Pay Steep Price To Trade Munis

Bond Buyer - "Mom and Pop Pay Steep Price To Trade Munis, Study Shows" cites research by Dr. Piwowar showing that municipal bonds are expensive for retail investors to trade.



Why Brokers Want You to Buy 'B Shares'

Wall Street Journal - "Why Brokers Want You to Buy 'B Shares' and Other Questionable Investments," extensively cites research conducted by Dr. O'Neal on multiple share class mutual funds.



Mind Your Money, and Your Broker

Washington Post -"Mind Your Money, and Your Broker" quotes Dr. O'Neal on the tendency for brokers to recommend higher cost actively managed mutual funds rather than less expensive index funds.



An Overview of the Regulation of the...

Dr. Piwowar's research on trading costs in the corporate and municipal bond markets is cited in testimony by two witnesses at the US Senate Committee on Banking, Housing, and Urban Affairs Hearing on "An Overview of the Regulation of the Bond Markets."



True Fund Costs Tricky to Figure

Denver Rocky Mountain News - "True Fund Costs Tricky to Figure," cites mutual funds research by Dr. O'Neal.



SEC's Agreement with MFS Puts Mutual Funds...

Wall Street Journal - "SEC's Agreement with MFS Puts Mutual Funds on Notice" quotes Dr. O'Neal on mutual-fund transaction costs.



How much does trading cost?

Business Week - "How much does trading cost?" cites research on mutual fund brokerage commissions conducted by Dr. O'Neal.



Funds' risk changes at disclosure times...

Washington Post - "Funds' risk changes at disclosure times, study says." Dr. O'Neal's research on window-dressing was presented to SEC staff members who asked O'Neal to identify specific mutual funds with the most striking trading patterns.



"Concentrated Stock Dangers"

On Wall Street's "Concentrated Stock Dangers" describes research conducted by Dr. McCann and Dr. Luo on the disastrous results from the strategy recommended by some brokerage firms to borrow against a concentrated position and buy additional stocks to diversify.



Fund Group Pushes New Disclosures

Wall Street Journal - "Fund group pushes new disclosures." "Surprisingly, commission levels do not appear in most fund prospectuses and therefore most investors are completely unaware of the magnitude of these costs of trading," says Dr. O'Neal.



New Light on Hidden Fees

Newsweek - "New Light on Hidden Fees" cites extensively research by Dr. O'Neal on trading costs in mutual fund portfolios.



Can the Muni Market Be Made Safe for Investors?

Joe Mysak's column "Can the Muni Market Be Made Safe for Investors?" for Bloomberg News reviews Dr. Piwowar's research on trading costs in the municipal bond market.



Muni Bonds Can Cost More to Trade than Stocks

Wall Street Journal - "Muni Bonds Can Cost More to Trade than Stocks" extensively cites research by Dr. Piwowar on secondary trading costs in the municipal bond market.



Pricey Municipal Bonds

San Francisco Chronicle - "Pricey Municipal Bonds" extensively cites research by Dr. Piwowar on secondary trading costs in the municipal bond market and features the finding that complex bonds (bonds with a lot of "bells and whistles") are more expensive to trade than simple bonds.



Muni Trading Costs High

Bond Buyer - "Muni Trading Costs High" extensively cites research by Dr. Piwowar on secondary trading costs in the municipal bond market.



Study finds large mutual funds have undisclosed...

Boston Globe - "Study finds large mutual funds have undisclosed trading costs." "The true or total cost of investing in mutual funds is substantially higher than is disclosed by the expense ratio," says Dr. O'Neal.



Massachusetts Financial in Talks to Settle...

Los Angeles Times - "Massachusetts Financial in Talks to Settle Fund Probes" cites study by Dr. O'Neal that shows fund trading costs are substantial in certain fund families.



Damage Theories Under State Law for Securities...

Dr. McCann presents "Damage Theories Under State Law for Securities Violations by Brokers in Arbitration" to the Houston Bar Association.



Morgan Stanley is sued on 'Break Points'

Wall Street Journal - "Morgan Stanley is sued on 'Break Points'." Suit draws extensively on research published by O'Neal on multiple share class mutual funds.



How to Make Money in Mutual Funds...

Wall Street Journal - "How to Make Money in Mutual Funds: Start your own" quotes Dr. O'Neal on the mutual fund industry.



Choosing the Right Class of Shares Can Add Up..

Wall Street Journal - "Choosing the Right Class of Shares Can Add Up to Savings on Fees'" quotes Dr. O'Neal's research on mutual fund share classes.