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| Investment Fraud InfoCenter is an Internet resource that offers you an opportunity to research brokerage fraud and your legal rights associated with investment fraud. Investment Fraud InfoCenter does not offer legal advice or referrals. |
| Investment Fraud Information |
Investment FraudWhat is investment or brokerage fraud? The Securities and Exchange Commission (SEC), which governs investment and brokerage fraud, prohibits investment banks, brokerage firms, brokers, and dealers from making statements, omitting facts, or engaging in “fraudulent or manipulative acts and practices, in connection with the purchase or sale of securities.” In other words, securities firms are not allowed to mislead the public, thereby defrauding investors. Unfortunately, a number of major investment banking firms have come under recent fire for allegedly issuing intentionally inaccurate stock reports. Conflicts of interest and analysts’ desire to earn bonuses have been cited as possible explanations. As a result, the SEC has already issued new rules for investment banking firms and analysts, with more regulations possibly forthcoming. Merrill Lynch Merrill Lynch is one of several Wall Street institutions that, while admitting little, are believed to be guilty of conflicting interests. Specifically, Merrill Lynch analysts and brokers advised investors to purchase and keep stocks that then fell dramatically. These analysts are accused of issuing this advice in an effort to secure investment banking deals with the beneficiaries. The relationship that garnered the most attention involved analyst Henry Blodget and energy provider Enron. So far, little punishment has been meted out to either Merrill Lynch or Blodget for these suspected illegal dealings. Salomon Smith Barney Salomon Smith Barney’s golden-boy analyst, Jack Grubman, suggested that investors purchase the stocks of companies with which, it has recently been revealed, he may have had questionable relationships. However, Grubman and other Salomon Smith Barney employees have also been accused of providing executives in these same corporations with initial public offerings (IPOs) to their personal benefit, only to parlay the favor into more deals. One such company that Grubman has been tied to is WorldCom. Morgan Stanley Morgan Stanley is one of a group of Wall Street securities firms forced to pay fines to the SEC for allowing alleged conflict of interest to color their stock reports. The luxury goods maker LVMH has filed a lawsuit against Morgan Stanley, claiming that the investment bank’s ties to LVMH rival Gucci influenced stock reports. Morgan Stanley has repeatedly asserted its innocence, going so far as to threaten LVMH with a counter suit for defamation. |