As reported in the Wall Street Journal on March 25, 2014, the SEC is investigating bond fraud and whether a Wall Street boom in complicated bond deals is creating new avenues for fraud, according to people close to the probes.
Jeffrey Pederson has been representing investors for 20 years and has recovered in excess of $50 million for his clients. He has represented hundreds of investors successfully concerning the sale of inappropriate investments such as bond fraud.
Bond fraud can take many shapes. Brokers often represent low grade bonds as quality. This is facilitated by the fact that many investors understand that fixed income investment such as bonds generally have low risk.
Fraud can also be in the form of labelling investments that are not publicly traded as bonds. Such investments are commonly called “alternative” investments. Such investments can have very little in common with traditional bonds, but are sold as bonds to capitalize on the belief that bonds are low risk.
Investigators are looking at whether banks and investment companies, such as investment advisors and brokerage firms, are using the bond deals to hide certain risks illegally, said the people close to the probes. A number of likely cases in that area are in the pipeline, one of the people said.
Separately, the government has expanded an inquiry into how Wall Street banks sell the deals. The securities being examined aren’t traded on any exchanges or open platforms, and their prices are negotiated privately between buyers and sellers.
The probes could pose a new legal headache for banks, which have faced years of government investigations and large financial settlements involving their conduct leading up to the financial crisis.
If you have questions about whether you have recourse for bond losses, call 303-300-5022 for a free consultation.