Securities Law Blog

Armed with an argument for protecting investors' rights, SEC member Luis Aguilar went before the North America Securities Administrators Association's annual conference in Washington, D.C to argue that mandatory arbitration agreements should not be allowed, according to a recent Reuters.com article. Aguilar feels that the investor should be able to choose the forum in which they want to bring their legal claims.

These are the first really outspoken comments by Aguilar since the enactment of the 2010 Dodd-Frank Wall Street reform law, provided the SEC with new powers to raise investor protections, including the authority to scale back or completely prohibit pre-dispute arbitration agreements.

Arguments made by those who want to continue with mandatory arbitration agreements include the reduction of costs and prevention of frivolous litigation, according to the Reuters.com article.

As of yet, the SEC has not taken action on Aguilar's proposal. Aguilar is one of five voting commissioners but the article pointed out that his views on some issues have diverged from those of some of his peers on the commission.

Continue reading "SEC Urges an End to Mandatory Arbitrations" »

Saba Software, Saba, a provider of cloud computing software used for training and conferencing, recently announced that it received a letter from NASDAQ indicating the Company's ongoing failure to comply with NASDAQ's listing requirements. The failure to comply is related to the Company's failure to timely file certain financial statements with the SEC. The Company previously announced that it will be restating previously issued financial statements for fiscal years 2008, 2009, 2010, and 2011, and is reviewing the Company's unaudited financial statements for the three months ended August 31, 2012 and the six months ended November 12, 2012. The Company also announced that its public accounting firm will resign upon the completion of the audit and restatements.

On March 1, 2013, the Company announced that its founder, director and CEO Bobby Yazdani was stepping down from all of those positions effective immediately. Burke Harvey & Frankowski is investigating whether the directors and officers of Saba Software breached their fiduciary duties owed to the Company and its shareholders in connection with the above and caused the Company damages.

Continue reading "Burke, Harvey & Frankowski, LLC Announces Investigation of Saba Software, Inc. " »

A putative Class Action Complaint was filed in the United States District Court for the District of Massachusetts for Timothy Kelley (an ex-participant in the Avanade and Hewlett-Packard 401(k) plans) and Jamie Fine (a participant in the Delta 401(k) plan) accusing Fidelity of fiduciary breaches over its handling of floating participant contributions . Class action status is being sought on behalf of all Fidelity 401(k) participants, not just participants in the Avanade, Delta and HP plans.

The Complaint alleges that Fidelity 401(k) participants' contributions are held in temporary cash accounts before being invested in mutual funds and the like. These contributions are then held in the cash account, earning interest. The Complaint alleges Fidelity takes all of that interest and first pays itself. Then, the Complaint argues, Fidelity will take the rest of that interest and put it in the mutual fund which is spread out over investors. The Complaint focuses on this practice that affected all 401(k) plans for which Fidelity does recordkeeping.

This is not the first time Fidelity has been sued over retirement or investments accounts. According to a NY Times Article, employees of ABB, Inc. sued ABB and Fidelity for charging excessive retirement management fees. The judge in the case ruled that ABB breached its fiduciary duty to its own employees. The court also held that Fidelity breached its fiduciary duty to ABB's retirement plan by failing to allocate properly interest earned from the overnight investment of plan funds. The court originally ordered ABB to pay $35.2 million in damages and Fidelity to pay $1.7 million, according to the article, but later ordered ABB and Fidelity to pay $13.4 million more in attorney fees and costs. The article quoted from the Judge's opinion that "ABB breached its fiduciary duties of both loyalty and prudence to the retirement plans, as a result of which it benefited significantly while plan beneficiaries were deprived of millions of dollars. Fidelity, while less culpable, also took plan assets in violation of its fiduciary duty."

The Plaintiffs' attorneys are: Richard Frankowski with Burke Harvey & Frankowski in Birmingham, Alabama; Joseph Peiffer of Fishman Haygood Phelps Walmsley Willis & Swanson in New Orleans; Todd Schneider and Mark Johnson in San Fransico, and Garrett Wotkyns and Michael McKay in Scottsdale, Arizona, all four of whom are with Schneider Wallace Cottrell Brayton Konekcy; James Kaufman of Levin, Papantonio, Thomas, Mitchell, Rafferty & Proctor in Pensavola, Florida; Elizabeth Ryan and John Roddy with Bailey in Boston; and Suyash Agrawal and Jeannie Evans with Agrawal Evans in Chicago.

Continue reading "Class Action Complaint Filed Against Fidelity" »

Trial Court Judge Jed Rakoff is accused of exceeding his authority in rejecting a settlement reached by the SEC and Citigroup. The settlement came after the SEC initiated a civil fraud action against Citigroup regarding the sale of a complex $1 billion mortgage bond deal during the end of the housing boom. The SEC also alleged Citigroup deceived its customers by selling them risky mortgages that the bank allegedly knew would decline in value. The clients involved suffered more than $600 million in losses.

Citigroup agreed to pay $285 million to settle the complaint, but Judge Rakoff rejected the settlement. According to the NY Times Dealbook article, Judge Rakoff called the proposed settlement amount "pocket change" for the bank. The Judge also wrote in his opinion, according to the article, that the settlement did not require Citigroup to admit to or the SEC to prove fraud, which deprived the public "of ever knowing the truth in a matter of obvious public importance."

Judge Rakoff did not attend the proceedings at the United States Court of Appeals for the Second Circuit in Manhattan. His court-appointed lawyer did attend the argument in front of the three judge panel, regarding his authority to reject the SEC/Citigroup settlement. According to the article, John R. Wing, the lawyer for Judge Rakoff, argued that a judge is not bound to approve every consent decree from the SEC while only assuming the decree is in the public's interest. Judge Rakoff wanted additional evidence to ensure his judgment was well informed.

Many governmental bodies use the "neither admit nor deny wrongdoing" language in settlement with corporate defendants. A worry addressed in the article is that if the Second Court of Appeals agrees with the Judge, than other judges would refuse to approve settlements with that language. Also, having to admit fault could be quite the deterrent to corporate defendants choosing to settle and more cases will go on to a costly trial. The NY Times Dealbook article quotes Brad S. Karp, a lawyer for Citigroup, as saying that, "Many corporations will decide to not settle matters if a requirement is to admit liability," Mr. Karp said. "The federal regulatory enforcement regime would screech to a grinding halt."

Judge Rakoff's lawyers argued in response that, "The S.E.C.'s and Citigroup's concept of deference -- in which courts would be effectively reduced to potted plants -- would surely undermine the independence of the federal judiciary." The Courts need not approve every settlement that comes their way just because it was offered by a federal agency. Citigroup and the SEC argued that requiring an admission of fault would lead to more costly trials. However, approving all settlements without an indication of fault may be better for the defendant but their ease in settlement should not be favored over the public's interest.

This is not the first time Judge Rakoff has rejected an SEC settlement. The article acknowledges that the Judge has been a vocal critic of the SEC and their settlements which allow a company to settle fraud case by paying a fine without having to admit any wrongdoing. Such settlements must be approved by the court to be "fair, reasonable, adequate and in the public interest." Judge Rakoff, in 2009, rejected the SEC and Bank of America settlement related to the bank's acquisition of Merrill Lynch. Other federal judges in Brooklyn, Colorado and Wisconsin have followed suit and demanded greater information and/or accountability from defendants approving settlements with the S.E.C. and other government agencies.

Continue reading "Judge Accused of Exceeding Authority by Rejecting SEC Settlement" »

Notice to Morgan Keegan Customers Who Invested In the RMK Closed-End Bond Funds: The Law Firm of Burke Harvey & Frankowski, LLC Urges You to Fully Explore Your Legal Options Regarding the Proposed Class Action Settlement With Morgan Keegan

BIRMINGHAM, AL., Feb. 5, 2013 (GLOBE NEWSWIRE) -- The Law Firm of Burke, Harvey and Frankowski L.L.C. ("BHF Legal") (http://www.bhfsecuritieslaw.com) advises all Morgan Keegan customers who lost $10,000 or more in the RMK Closed-End Bond Funds and who have not already filed FINRA arbitrations to fully explore all of their legal options in connection with the settlement of In Re Regions Morgan Keegan Closed-End Fund Litigation ("Class Action"), Case No. 07- CV-02830. You have the right to opt out of this settlement on or before March 22, 2013. If you do not opt out, you will release valuable legal rights if the settlement is approved. We are ready to advise you on the opt-out process.

The proposed settlement will result in a few cents on the dollar for aggrieved investors if legal fees and costs of $19.15 million are approved. Many Morgan Keegan customers have done much better than this by filing individual arbitrations. In cases where damages are $50,000 or less, clients do not have to attend an arbitration hearing, and can simply submit a brief to support their claim.

The deadline for filing an objection or opting out of the class is March 22, 2013. If you do nothing by that date, you will be bound by the settlement if it is approved by the Court.
The RMK Closed-End Bond Funds involved in the settlement include the RMK Advantage Income Fund (RMA) n/k/a Helios Advantage Income Fund (NYSE: HAV), RMK High Income Fund (RMH) n/k/a Helios High Income Fund (NYSE: HIH), RMK Multi-Sector High Income Fund (RHY) n/k/a Helios Multi-Sector High Income Fund (NYSE: HMH) and RMK Strategic Income Fund (RHY) n/k/a Helios Strategic Income Fund (NYSE: HSA).
The attorneys at Burke, Harvey & Frankowski, LLC have successfully represented Morgan Keegan customers in arbitrations throughout the country.
Current and former customers of Morgan Keegan are encouraged to contact Attorney Richard Frankowski at 888-930-9091 for a free consultation to explore their legal rights and options. You can email Mr. Frankowski at rfrankowski@bhflegal.com. Visit BHF on the web at http://www.bhfsecuritieslaw.com.

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.

Smaller than Standard & Poor's or Moody's, Egan-Jones is based in Haverford, PA with principle Sean Egan at the helm. It differs not only in size from its competitors but also in its business model. Standard & Poor's and Moody's both are paid by the companies that they rate while Egan-Jones accepts payment only from the investors interested in the ratings. This seemingly less biased business model has not completely protected the ratings firm. The Securities and Exchange Commission (SEC) investigated the firm for a few years and filed charges against the company and its principle. According to a NY Times Dealbook article, Egan-Jones is barred from issuing certain government-recognized ratings for 18 months. The article stated that the trouble Egan-Jones found them in started when the firm made misstatements on an application with the government.

The SEC said the firm had exaggerated its record when it applied for a government designation in July 2008. The firm said then that it had performed 150 ratings of asset-backed securities and 50 ratings of governments, when it actually had performed none at that time, according to the agency. Egan-Jones had also violated provisions preventing conflicts of interest, because two analysts helped to rate entities whose securities they also owned, according to the SEC.

The ratings firm allegedly allowed two analysts to assist in rating entities comprised of securities they also owned. The SEC also alleged that the firm made misstatements when applying for a government designation. These misstatements were characterized in the article as the firm stating they had rated 150 asset-backed securities and 50 ratings of governments when at the time, it had not performed any of the 150 ratings it claimed.

Discussed in the article also were the terms of the penalty- the firm is still allowed to issue ratings but when rating asset-backed or government securities issuers, the firm will not be able call themselves a nationally recognized statistical rating organization. This ban will last for 18 months and Egan-Jones will be eligible to apply again for the designation once the ban ends.

Continue reading "SEC Bars Egan-Jones from Issuing Certain Ratings " »

The Board of American International Group, Inc. (AIG) soon will meet to decide if the company, who just paid off their $182 billion bailout debt, will join a $25 billion shareholder lawsuit against the government, according to an article in the NY Times Dealbook.

The lawsuit in question was filed in 2011 by Maurice Greenberg, AIG's former chief executive for almost forty years. According to the article, Greenberg claimed the government deprived shareholders of tens of billions of dollars and violated the 5th Amendment when it bailed out the large insurance company. Greenberg filed suit against the government in the federal courts of New York and Washington. The New York case was dismissed and is on an expedited path for review at the Court of Appeals for the Second Circuit while the Washington Court declined to dismiss the case. The Washington Court is now waiting on AIG's decision.

Greenberg alleges that when the government bailed out AIG, which even he admittedly agreed the company needed, the government improperly used AIG funds to provide a "backdoor bailout" of Wall Street. He also claims, according to the NY Times Dealbook article, that the government violated the 5th Amendment prohibiting the government taking private property , i.e. AIG shareholder funds, for public use. Greenberg also claims the bailout plan took a "punitive" interest rate of 14 percent or more while also diluting the holdings of investors, according to the article . A spokesman for the Federal Reserve Bank of New York stated that the alternative to the bailout for AIG was to file bankruptcy. Potentially joining the litigation must be brought to the shareholders due to AIG's business responsibilities and the fiduciary duties AIG owes their shareholders. It would be improper for the board members to not consider the lawsuit at all, due to the duty they owe the shareholders.

On January 9, 2013, the board of directors will meet with Greenberg's current company, Starr International. Afterwards, the Treasury Department will make a presentation and then both parties will be allowed time for rebuttal. It is not known when the board will make a decision regarding joining the suit. The article states that while discussions were already scheduled for board meetings, it is rare for the entire board to meet over a question of joining a single litigation.

Continue reading "AIG Considering Suing Government Over Bailout" »

Burke, Harvey & Frankowski, LLC ("BHF") announces the commencement of an investigation into Vascular Solutions Inc., ("Vascular Solutions" or the "Company") to determine whether the Company's officers and directors have breached their fiduciary duties owed to Vascular Solutions and its shareholders by causing the Company to illegally market certain of its medical devices for unapproved, or "off-label," uses.

Founded in 1996 and based in Minneapolis, Minnesota, Vascular Solutions is a biopharmaceutical company that markets and sells the products for interventional cardiologists and interventional radiologists. Vascular Solutions offers products and services in three categories: catheter products, hemostat products and vein products and services. Catheter products consist of catheters used in minimally invasive medical procedures for the diagnosis or treatment of vascular conditions. Hemostat products consist of products used to control surface bleeding. The Company's vein products consist of Vari-Lase endovenous devices.

On November 19, 2010, a former Vascular Solutions employee filed under seal a qui tam action against the Company alleging Vascular Solutions illegally marketed its Vari-Lase endovenous laser product to treat conditions other than those approved by the Food and Drug Administration and engaged in an illegal kickback scheme with doctors who prescribed the device for off-label use, in violation of federal law. The complaint also alleges that Vascular Solution's off-marketing scheme resulted in over $20 million in improper Medicare and Medicaid reimbursements.

Soon thereafter, on June 28, 2011, Vascular Solutions announced that it had received a subpoena from the U.S. Attorney's Office for the Western District of Texas under the Health Insurance Portability & Accountability Act of 1996 requesting the production of documents related to the Company's Vari-Lase products. The government later elected to intervene in the qui tam action.

What You Can Do

If you are a long term Vascular Solutions shareholder, you may have legal claims against Vascular Solutions' officers and directors. 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.

Continue reading "Burke Harvey & Frankowski LLC Announces Investigation of Vascular Solutions Inc." »

Dynamic Securities Analytics, Inc. released their nationwide rankings for the first two quarters of 2012. The law firm of Burke, Harvey & Frankowski topped the list at second in the country. For the rankings, Dynamic compiled the number of cases each firm had in the first two quarters. Those firms that obtained the most wins for their clients, combining the most arbitration award announcements and stipulated settlements, in the areas of Customer-Member and Small Claim disputes made the cut. For the rest of the rankings, see the list here.

Continue reading "BH&F RANKED 2ND IN THE COUNTRY IN SECURITIES ARBITRATION" »

Burke, Harvey & Frankowski, LLC ("BHF") announces the commencement of an investigation into Ancestry.com Inc., ("Ancestry.com" or the "Company") to determine whether it has violated securities laws by issuing false and misleading statements to its shareholders in connection with its public offering of securities in May of 2011.

On May 11, 2011, Ancestry.com filed a Prospectus in connection with its Secondary Public Offering of approximately 4.35 million shares of its common stock at $42 per share. In the months following the Secondary Offering, however, the company's stock declined precipitously after revelations were made about the Company's subscriber base and the costs to stem the declines in subscriber growth. We are investigating whether the Company issued false and misleading statements to the investing public in connection with its Secondary Public Offering of securities.

What You Can Do

If you are an Ancestry.com 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.

Continue reading "Burke Harvey & Frankowski LLC Announces Investigation of Ancestry.com Inc. " »

Burke, Harvey & Frankowski, LLC ("BHF") announces the commencement of an investigation into Duke Energy Corporation, ("Duke" or the "Company") to determine whether it has violated securities laws by issuing false and misleading statements to its shareholders in light of recent disclosures made about the Company's $32 billion merger with Progress Energy.

On July 2, 2012, Duke closed it $32 billion merger with Progress Energy.  Shortly after the merger closed, Duke fired its CEO, prompting a former Progress Energy director to announce that the Progress Energy board of directors had been mislead prior to the merger.  The North Carolina Utilities Commission has also announced that it was revisiting whether it was mislead as to the terms of the merger.  When the true nature of the merger was revealed to investors, the share price of Duke's stock dropped significantly on high trading volume.  We are investigating whether the Company issued false and misleading statements to the investing public in connection with the merger.

What You Can Do

If you are a Duke 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.

Continue reading "BURKE HARVEY & FRANKOWSKI INVESTIGATE DUKE ENERGY CORPORATION" »

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

Continue reading "BURKE HARVEY & FRANKOWSKI INVESTIGATE EATON" »

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" »

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 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" »