A Bad Broker Found His Firm; You Should Avoid Them Both
(Jun 2016)
In June 2016, a FINRA panel in Albuquerque, NM ordered Centaurus Financial, Inc. to pay the Claimant, a recent widow when the subject conduct began, $150,000 plus all hearing fees after reasoned findings that "the investments Hashemian recommended while at Centaurus were not suitable", that Centaurus was responsible for Hashemian's actions which "constituted fraudulent and negligently made misrepresentation and omitted material information in the sale of investments" and that "Centaurus...
More Impossible Trade Prices Caused by Auto-liquidators: Option Combinations
(Dec 2015)
In three previous blog posts, we documented how auto-liquidators execute option trades at distorted prices to their clients' detriment. The price distortions are caused by the price impact of large sell or buy orders on thinly traded securities. These distortions were reversed within minutes, but not before causing investors millions of dollars of unnecessary losses.
In "The Recent Market Turmoil Spells Trouble for Auto-liquidators like Interactive Brokers", we showed that thinly traded...
More Non-traded REIT Perfidy: The Roll-up Grift
(Nov 2015)
We have extensively researched non-traded REITs and concluded that these illiquid direct participation programs have cost investors $50 billion compared to more liquid investments in traded REITs. Our Fiduciary Duties and Non-traded REITs provides a good overview of the problems with non-traded REITs and a summary of our empirical results. An Empirical Analysis of Non-Traded REITs contains a more detailed explanation of our research. See our previous blog posts on individual non-traded...
Only a Faulty Auto-liquidator Pays More for An Option Than it Can Ever Be Worth
(Nov 2015)
In two previous blog posts we documented how auto-liquidators appear to have executed option trades at distorted prices to their clients' detriment on August 24, 2015. The price distortions were caused by massive sell or buy orders on thinly traded securities being dumped into the market by auto-liquidation programs. These distortions were reversed within minutes, but not before causing investors millions of dollars of unnecessary losses.
In "The Recent Market Turmoil Spells Trouble for...
More Signs of Trouble for Auto Liquidators
(Oct 2015)
In "The Recent Market Turmoil Spells Trouble for Auto Liquidators Like Interactive Brokers" we wrote about how the market decline on August 24, 2015 revealed continuing problems at auto-liquidating brokerage firms that cater to active traders. These active traders' accounts typically are subject to "portfolio margin" requirements which we have written about at length. 1
We showed that thinly traded long-dated, deep out-of-the money SPX put options were bought on August 24, 2015 at...
The Recent Market Turmoil Spells Trouble for "Auto-liquidators" like Interactive Brokers
(Aug 2015)
Interactive Brokers Group, Inc. (IB) caters to active traders including those who trade futures and options. These active traders' accounts typically are subject to "portfolio margin" requirements which we have written about at length. 1 IB requires its customers to agree to have IB auto-liquidate positions when accounts are in a margin deficit.
IB's auto-liquidation procedures were the focus of a FINRA arbitration earlier this year in which the Claimant, Glen Lyon Long-Term Options, LP,...
Why Citigroup Paid the SEC $180 Million Over MAT/ASTA
(Aug 2015)
I. Introduction
This week Citigroup paid $180 million to the SEC to settle allegations that Citigroup improperly sold high risk hedge funds known as MAT, ASTA and Falcon. The SEC Order is available to view online.
The SEC Order makes clear that Citigroup did not effectively monitor the portfolio manager or the sales force as it sold billions of dollars of high risk MAT ASTA funds with false and misleading sales presentations. In the end, Citigroup lost hundreds of wealthy clients and likely...
Oil and Gas DPPs From Just Two Sponsors Have Caused $3.7 Billion in Losses
(Feb 2015)
We have written extensively about direct participation programs, or DPPs. See our blog posts on non-traded REITs and our discussion about equipment leasing DPPs. Oil and gas DPPs are another strain of the DPP epidemic: illiquid exposure to an existing underlying asset, loaded with confiscatory fees, conflicts of interest and unnecessary risk.
Oil and gas DPPs use some of investors' money to drill and operate oil and gas wells. Oil and gas DPPs are sponsored and managed either by investment...
UBS Puerto Rico's Bond Fund Debacle: What We Know so Far
(Feb 2015)
Over the past year, we've posted a dozen short commentaries to our blog post here. We thought it would be helpful to summarize what we know so far. This summary and our prior UBS Puerto Rico blog posts are available in Spanish. You can find all the Spanish-language blog posts by clicking here.
We discussed the national exposure of the UBS Puerto Rico losses in October 2013 in Trouble in Paradise: UBS Puerto Rico Bond Fund Investors Hit Hard. The losses only got worse thereafter. In calendar...
United Development Funding IV Left Investors $34.8 Million Worse Off
(Jun 2014)
On Wednesday last week, another non-traded REIT listed on a public exchange. United Development Funding IV (ticker: UDF), which sold as a non-traded REIT for $20 per share, closed its first day of trading on the NASDAQ at $19.60. As we have argued extensively in the past, we think that non-traded REITs are a very bad deal for investors, and UDF IV was no exception.
We have gone through all of UDF IV's SEC filings and applied the gross proceeds, distributions, and other cash flows to a liquid,...
