Securities Law Blog

Burke, Harvey & Frankowski LLC ("BHF") announces the commencement of an investigation into Eaton Corporation ("Eaton" or the "Company") (NYSE: ETN) to determine whether it has violated securities laws by issuing false and misleading statements to its shareholders in light of the disclosures made about the Company's wrongful course of conduct undertaken during a high stakes trade secrets lawsuit in Mississippi state court.

In 2011, a Mississippi state court judge found that Eaton and its executives were aware of, and sanctioned, an illegal scheme to improperly influence the judicial process.  On May 31, 2012, Eaton executives and attorneys submitted affidavits to a Mississippi state court admitting that damaging emails and documents related to this scheme had been improperly withheld from the other party to the lawsuit.  In reaction to this news, shares of Eaton fell significantly on high trading volume.  We are investigating whether the Company issued false and misleading statements to the investing public when news of the improper scheme first came to light.

What You Can Do

If you are an Eaton shareholder, you may have legal claims under the securities laws.  If you wish to discuss this investigation, or have questions about this notice or your legal rights, please contact attorney Richard Frankowski via email at rfrankowski@bhlegal.com or via toll-free telephone at (888) 930-9091.  There is no cost to you.

About Burke, Harvey & Frankowski LLC

Burke Harvey & Frankowski, LLC, is a Birmingham, Alabama law firm that among other things dedicates its practice to the representation of shareholders and investors in litigation, including shareholder class actions, derivative litigation and FINRA arbitrations. More information about the firm is available through its website, www.bhflegal.com and upon request from the firm.  Burke Harvey & Frankowski, LLC has paid for the dissemination of this promotional communication, and is responsible for its content.

No representation is made that the quality of legal services to be performed is greater than the quality of legal services to be performed by other lawyers

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The SEC has adopted the FINRA communication rule, which has some noticeable changes from the previous NASD rule, according to the article on Mondaq.com. One noticeable change was the consolidation of the six communication categories into three- institutional communication, retail communication and correspondence. The article further illuminated the difference between retail and institutional correspondence, per FINRA and The SEC.

There are also many other requirements set forth by FINRA and the SEC putting forth standards for retail and institutional communication as well as review procedures for such communication. The article also states that a "public appearance" is no longer a separate category and will fall under the new guidelines and requirements of the communication rule.

Continue reading "SEC ADOPTS NEW FINRA COMMUNICATION RULE" »

"Bond funds" and "income funds" are terms used to describe a type of investment company (mutual fund, closed-end fund or unit investment trust (UIT)) that invest primarily in bonds or other types of debt securities. Depending on its investment objectives and policies, a bond fund may concentrate its investments in a particular type of bond or debt security--such as government bonds, municipal bonds, corporate bonds, convertible bonds, mortgage-backed securities, zero-coupon bonds--or a mixture of types. The securities that bond funds hold will vary in terms of risk, return, duration, volatility and other features.

Continue reading "SEC EXPLAINS BOND FUNDS AND INCOME FUNDS" »

Morgan Keegan agreed to pay over $630,000 to 10 ERISA pension plans after an investigation by the US Department of Labor, according to the Department's press release.  The investigation found that Morgan Keegan violated federal law when it recommended certain hedge funds to the pension plans.

The press release went on to state that Morgan Keegan will now disclose to all of the ERISA plans it works with if indeed Morgan Keegan is acting as a fiduciary to them and what exactly that role entails. Morgan Keegan also must disclose all fees it has collected in conjunction with the pension plans and refund any third party fees collected to the pension plans.

Continue reading "MORGAN KEEGAN TO PAY OVER $630,000 AFTER DEPT. OF LABOR FINDS PENSION RULE VIOLATION" »

The Eleventh Circuit reinstated an SEC enforcement action against Morgan Keegan & Co., holding that the Northern District of Georgia erred in granting summary judgment.  In SEC v. Morgan Keegan & Co., 2012 WL 1520895, the SEC alleged that the Morgan Keegan's brokers had misrepresented auction rate securities as cash alternatives and did not disclose that ARS carried liquidity risk, according to this article.

The Eleventh Circuit held that the brokers' alleged misstatements can be included in the materiality inquiry. The article also stated that The Eleventh Circuit said the number of investors effected was not determinative; if the brokers' statement reached thousands or only four people, as in this case, their statements can still held to be materially misrepresentative.

Continue reading "11TH CIRCUIT REINSTATES SEC'S AUCTION RATE ACTION AGAINST MORGAN KEEGAN" »

A recent Reuters.com article explains the complex details of the new two FINRA rules coming into effect on July 2, 2012. FINRA's Know Your Customer Rule and Suitability Rule require firms to use due diligence when dealing with customers. According to the article, the new rules will also now require customers to provide detailed information about their investment needs and themselves.

The Know Your Customer Rule requires diligence on the part of brokers to have all the documents necessary to fully understand the wants and needs of their customers. It also places a responsibility on the customer to provide such documents. The Suitability Rule demands a level of diligence on both parties and requires a customer to provide what is necessary for a broker to decide what is suitable.  The Rule requires brokers to base all recommendations off a complete customer investment profile. FINRA also establishes three factors for consideration when determining if a communication is a recommendation and thus would fall under this rule.

Continue reading "FINRA'S NEW RULES REQUIRE BROKER CHANGES AND NEW STRATEGIES" »

According to a recent Reuters.com article, July 2, 2012 will be the launch date for a new FINRA program that will allow more flexibility in large arbitration cases. The new program will be for claims $10 million dollars or more and allow them to shape their cases and bypass some of the FINRA arbitration rules, the article explains.

While the majority of FINRA arbitrations are not dealing with disputes at the $10 million dollar mark, those roughly 6,500 cases are very time consuming and expensive going through the traditional FINRA process. If the program is a success, FINRA plans on asking the SEC to formalize it.

Continue reading "FINRA TO LAUNCH NEW ARBITRATION PROGRAM" »

According to a Business Standard.com article, former broker Gurudeo Persaud based investments off the lunar cycle.  Persaud used an internet site that made market predictions based off gravitational pull and the lunar cycle to decide how to invest for his clients.  The article also reported that of the approximately $1.1 million dollars he received from investors, Persaud used around $415,000 for his own personal use. Persaud used money he received from one investor to pay off another in a Ponzi scheme to try and hide his misuse of his investors funds.

Of the money he collected from family and friends, he used around $415,000 for his personal expenses and then lost anthoer $400,000 by following the internet service that correlated gravity and the moon to the market.

Continue reading "SEC CHARGES ASTROLOGER IN PONZI SCHEME" »

A Federal District Court Judge in Manhattan refused to dismiss the investor lawsuit alleging that Goldman Sachs made misleading statements regarding its ethical standards, the New York Times' Dealbook reported. The alleged misleading statements and disclosures were about conflict of interests between Goldman Sachs and other companies.

The article discussed one such example, a deal called Abacus, where Goldman Sachs was partnered with Paulson & Company, though this was not disclosed to investors. Paulson & Company eventually settled their SEC case by paying a $500 million penalty and admitting to making a mistake with its disclosure.

The next step in the Goldman Sachs case in the Federal Court is the discovery stage. In discovery, corporate documents will be requested, as well as depositions with the three executives also named in this case.

Continue reading "GOLDMAN SACHS DISCLOSURE FRAUD CASE TO CONTINUE" »

Morgan Keegan must repay over $470,000 in financial losses of a group of RMK Fund investors, according to the June 13, 2012 Order of an arbitration panel of the Financial Industry Regulatory Authority (FINRA). The three person arbitration panel heard the case in Birmingham, AL.

The Claimants are among thousands of investors who lost money as a result of Morgan Keegan's fraudulent conduct in connection with the RMK (Regions Morgan Keegan) family of bond funds.  The claimants alleged that the funds were unsuitable investments for them and were misrepresented by Morgan Keegan as being much safer than they actually were.  The claimants were represented by attorneys Howard Prossnitz of Chicago, IL and Richard S. Frankowski and Robert E. Norton and of the firm Burke, Harvey & Frankowski in Birmingham, AL.

Continue reading "ARBITRATORS ORDER MORGAN KEEGAN TO REPAY OVER $470,000 TO INVESTORS" »

Burke, Harvey & Frankowski, LLC announces the commencement of an investigation into Alpha Natural Resources, Inc. ("ANR" or the "Company") (NYSE: ANR) to determine whether it has violated securities laws by allegedly issuing false and misleading statements with respect to ANR's June 1, 2011 Merger with the former Massey Energy Co. ("Massey").  After the Merger was completed, ANR gradually disclosed very serious problems that the Company was experiencing at its Emerald mine in southwestern Pennsylvania, one of the Company's most important coal mines.  During 2011, the Emerald mine shipped almost one million fewer tons of coal than the Company had estimated pre-Merger.  The price of ANR common stock has fallen approximately 72% since the Merger was completed.

Prior to the Merger, the Company indicated that any problems at its Emerald mine would be resolved by the end of June 2011.  Instead, and as made publicly known in the months following the Merger, ANR's problems at its Emerald mine were far more severe and potentially long-lasting than the Company had previously disclosed.

As the true severity of the problems at the Emerald mine was revealed, and as the Emerald mine shipped significantly less coal than the Company had previously estimated, ANR's costs of coal production rose dramatically.  We are investigating whether the Company properly disclosed the problems at Emerald mine in the Registration Statement and other relevant documents it issued in connection with its June 1, 2011 Merger involving Massey Energy Co.

What You Can Do

If you were a Massey shareholder and you acquired shares of ANR in the June 1, 2011 Merger, you may have legal claims under the securities laws.  If you wish to discuss this investigation, or have questions about this notice or your legal rights, please contact attorney Richard Frankowski at Burke, Harvey & Frankowski, LLC via email at rfrankowski@bhflegal.com or via toll-free telephone at (888) 930-9091.  There is no cost to you.

About Our Firm

Burke Harvey & Frankowski, LLC, is a Birmingham, Alabama law firm that among other things dedicates its practice to representation of shareholders and investors in litigation, including shareholder class action, derivative litigation and FINRA arbitration. More information about the firm is available through its website, www.bhflegal.com and upon request from the firm. Burke Harvey & Frankowski, LLC has paid for the dissemination of this promotional communication, and Richard Frankowski is the attorney responsible for its content.

No representation is made that the quality of legal services to be performed is greater than the quality of legal services to be performed by other lawyers.

Continue reading "BURKE HARVEY & FRANKOWSKI INVESTIGATE ALPHA NATURAL RESOURCES" »

The SEC approved two proposals to alter trading curbs meant to curtail volatility in the U.S. stock market, according to a Bloomberg.com article.

A  limit-up/limit-down system that prevents trades at prices outside a specified band has been approved. The article stated that also the SEC has supported changes to broaden circuit breakers instituted after the 1987 market crash. Both programs will be implemented for a one year pilot period, to start next on February 4, 2013.

FINRA oversees more than 4,400 brokers and introduced the curbs for individual stocks in May 2010 and later asked for and received permission to test the limit-up/limit-down system.

Continue reading "SEC AND FINRA INTRODUCE ADJUSTMENTS TO US TRADING CURBS" »

The United States Court of Appeals for the Eleventh Circuit reinstated the SEC's civil securities fraud action against Morgan Keegan & Co. Inc., according to a Reuters.com article. This reversed the district court's dismissal of the SEC's action arising from Morgan Keegan's sales of Auction Rate Securities (ARS).

The Eleventh Circuit found that the alleged oral misstatements of the brokers at Morgan Keegan could have been material, according to the article. These oral misstatements could have negated the accurate written disclosures.

The decision in Morgan Keegan follows The United States Supreme Court decision in Matrixx Initiatives Inc. v. Siracusano, which  reaffirmed that it is a fact-specific inquiry when determining if an alleged misstatement or omission is indeed material.

Continue reading "11TH CIRCUIT REINSTATES SEC'S FRAUD CLAIM AGAINST MORGAN KEEGAN" »

The Volcker Rule restricts the ability of federally insured banks to trade for their own benefit, according to this article in the New York Times.

The article states that with the large losses by banks in the trading of financial securities, especially mortgage-backed assets, there has been a push for more federal regulations. The Volcker Rule is one of the regulations pushed by the Obama Administration after the credit crisis.

The measure's main purpose is to keep federally insured deposits of average banking customers out of risk. To do so, one major part of the bars banks from making proprietary trades. Those are when the bank uses their money to place bets on the market that are unrelated to serving their customers.  The rule would also bar banks from investing in hedge funds or in private equities.

The article states that the measure has been fiercely opposed by banks and large Wall Street firms.

Continue reading "THE VOLCKER RULE AND RESTRICTING BANKS" »

The SEC has opened a preliminary investigation into the accounting practices of JP Morgan as well as into the company's public disclosures about their trading, according to an article in the New York Times.

According to the article, JP Morgan's revised value-at-risk measure could be a focus of the investigation. The company disclosed earlier this year that it changed the way it calculates the metric. A JP Morgan representative stated on May 10th that they had gone back to using the old way of measuring value-at-risk. However, their updated metric could have been responsible for masking or covering some of the risk within their trades.

JP Morgan has not been accused of any wrongdoing at this point as the investigation is still in a very early stage.

Continue reading "SEC OPENS INVESTIGATION INTO JP MORGAN'S 2 BILLION DOLLAR LOSS" »