In 2008 he convinced his client to deposit an additional $500,000 for him to manage to prove that he was still the right person for the job.

The stockbroker took what remained of his client’s irreplaceable life savings and invested the $500,000 in only 3 securities: MCG Capital Corporation (a commercial finance and advisory company), BP Prudhoe Bay Royalty Trust (entitled to royalties of Alaska crude oil production), and Enerplus Resources Fund (an energy trust that acquires oil and gas assets).

By the end of August of the same year the value of his account fell to $107,000.

The dramatic loss was not due to market conditions. The stockbroker failed to invest in a wide variety of investments that would have made it possible for the better performing securities to counterbalance the bad performance of others.

If you have experienced a similar situation, contact us for a free evaluation.

The LCM VII Notes were comprised of 7 tranches (one of a number of related securities offered as part of the same transaction): A-1, A-2, B, C, D, E-1, and E-2.

Banc of America Securities and/or its affiliates bought all of the Class A tranches.  A-1 was a revolving credit line and A-2 was a term note.  Both were rated AAA.

The B and C class shares were sold exclusively to Qualified Institutional Buyers such as universities, governmental entities, endowments, foundations, etc.

Class D and E-1 notes were available to Accredited Investors (annual income of $200,000+ for individuals, or $300,000+ joint; or net worth exceeding $1M), or to Qualified Institutional Buyers.

Class E-2 Notes were sold only to non-U.S. individuals living outside the United States.

There was a Threshold Value Event which called for the redemption of all of the notes if the market value of the CLO’s declined by a certain percentage. In October 2008, the Threshold Value Event was triggered and the Notes went into default.

Except for the fees paid to the creators and managers of this investment, what little money that remained after the Note went into default was paid to the investors based on the priority of classes i.e., A-1 to E-2.   Banc of America and its affiliates, owners of A-1 and A-2 classes, were the only entities to receive any of the proceeds from the sale of the underlying CLO’s.

Loss Recovery Center offers free case analysis for investors who have lost money due to bad advice or investments. If you feel you have incurred losses as a result of investing in LCM VII Notes, please contact our Reno, Nevada office at (775) 853-8778, or Toll Free at (877) 466-2722.

On January 21, 2010 a FINRA Arbitration Panel determined that Stifel, Nicholaus & Company, Inc. was liable for compensable losses in this case of unsuitable investments and strategies, negligence, failure to supervise, and breach of fiduciary duty. Claimants were represented by Newport Beach, California attorney Martin B. Greenbaum Esq., Greenbaum Law Group LLP, and Ronald E. Miller, Loss Recovery Center Inc., Reno, Nevada.

In October, 2007 our clients’ opened an account with Stifel, Nicholaus & Company, Inc.  They were on a fixed income of $800 monthly from Social Security.  To supplement their income they arranged through their stock broker to take monthly withdraws from their brokerage account.  In November 2007 their account value plunged by more than $150,000 due to the speculative and concentrated nature of the securities in their account.  By June 2008 their total portfolio depicted unrealized losses of $517,804.

The stock broker assigned to the account maintained a margin loan balance in excess of $280,000.  In October 2008, the broker had to liquidate the account to meet a margin call even though their portfolio had declined dramatically. Due to the losses  caused by the mismanagement of our clients’ funds resulting in the loss of their entire life savings, they attempted to take out a mortgage in order to provide some supplemental retirement income. To assist in the mortgage application process, their stock broker at Stifel wrote a memo to the bank, which reads in part:

“As recently as August and September of this year [2008], this account was valued in excess of $400,000 and produced monthly income of $6,000 plus.  Today, the account has no value and no income as a result of the forced liquidation of the securities to meet Federal margin calls.”

As a result of Stifels’ unsuitable security selection, concentration in the private equity sector of the market, use of extreme leverage, failure to mitigate losses or employ any other risk management strategies, and failed supervision of the stock broker’s activities, the FINRA Arbitration Panel decided Stifel, Nicholaus & Company, Inc., laible  for compensatory damages, interest, attorneys’ fees, and reimbursement of the non-refundable portion of the FINRA filing fee by awarding our clients’ $395,577.

The bulk of the award related to the client’s law firm’s Profit Sharing Plan which contained the assets of several employees. The claimants were represented by Reno attorney Tom Bradley of Sinai, Schroeder, Mooney, Boetsch, Bradley & Pace, and Ron Miller, President of Loss Recovery Center, Inc.

Ms. Meidell represented to all of her clients that she would prudently invest their life savings, including their retirement accounts, in a diversified portfolio of mutual funds, annuities and real estate limited partnerships that would grow and protect their funds. Instead, Ms. Meidell purchased equity mutual funds concentrated in the technology and services sectors of the stock market and further concentrated those portfolios in speculative and aggressive growth funds. As losses mounted in her clients’ accounts she then engaged in short term trading of mutual funds and/or market timing.

The Arbitration Panel’s award sent a clear message to Ms. Meidell and Associated Securities Corporation that investment advisors and the firms that supervise them have a solemn responsibility to disclose all material facts related to their investment strategy and to invest only in securities that are suitable for the each individual investor’s needs and objectives.