HOUSTON, April 23, 2009 (GLOBE NEWSWIRE) -- Shepherd, Smith, Edwards & Kantas LLP (www.sseklaw.com), a firm specializing in litigation/arbitration involving securities fraud and brokerage firm misconduct has filed another arbitration claim on behalf of a client of UBS International ("UBSI"). The allegations in the claim are similar to claims filed earlier this year against UBSI, a division of UBS (NYSE:UBS). The allegations in the claims involve the use of leverage (loans) to purchase securities, and also overconcentration of assets in preferred stocks issued by financial based companies (i.e. banks, brokerage firms and insurance companies).
The present case involves an 81 year old retiree who entrusted his life savings to the UBSI branch office in San Antonio, Texas. His broker of record recommended that he place all of assets, over $1,000,000, into two preferred stocks that were purchased on the initial public offering ("IPO"). Both positions were in the financial sector. Specifically, the IPOs were for preferred shares of Deutsche Bank (NYSE:DCE) and AIG (NYSE:AVF). UBS was one of the underwriters for both positions. Margin was utilized to complete the transactions. It is alleged in the claim that UBSI omitted to fully explain the ramifications of leverage, and that "boilerplate" risk disclosure documents were, for the most part, in English. The 81 year old Mexican national does not read or speak English, so he instead relied on the representations of his broker, who is fluent in Spanish. On information and belief, the broker's supervisor is also fluent in Spanish.
One of the hallmarks of suitable recommendations and proper portfolio management is diversification or "not putting all your eggs in one basket". This was known, or should have been known, by UBSI, the broker and his supervisor. The act of placing all of a retiree's assets in just two positions is unreasonable by any standard. Coupled with margin usage, the recommendation would likely be viewed as unscrupulous by an arbitration panel. As alleged in the claim, loans are often recommended by brokers, to increase their commissions/fees. What is usually not explained are the downsides associated with using leverage based on a fluctuating asset.
Furthermore, the act of overconcentrating a portfolio in a specific sector is also inappropriate. Many financial based companies that were cash strapped in late 2007 and early 2008 worked with brokerage firms to issue preferred stock to generate income. Many of these IPOs paid relatively generous commissions. If you have any information or questions regarding the above described events, or suffered a similar experience, feel free to contact the law firm of Shepherd Smith Edwards & Kantas LLP. All communications will be kept strictly confidential, and you will not be billed in any way for establishing contact.
Shepherd Smith Edwards & Kantas LLP has a team of attorneys, consultants and staff with more than 100 years of combined experience in the securities industry and in securities law. Since 1990, we have represented thousands of investors nationwide to recover losses. We have represented clients in Federal and state courts and in arbitration through the Financial Industry Regulatory Authority (FINRA), the New York Stock Exchange Inc. (NYSE), the American Arbitration Association (AAA) and in private arbitration actions. Collectively, we have represented over 1,000 investors during the last 18 years in negotiation, mediation, arbitration and litigation.