NEW YORK, Feb. 13, 2012 (GLOBE NEWSWIRE) — The Securities Arbitration Law Firm of Meissner Associates, www.StockESQ.com, announced today that it is continuing to investigate and/or pursue securities arbitration claims against Brokerage Firm Merrill Lynch and other firms with the Financial Industry Regulatory Authority’s (“FINRA”) office of Dispute Resolution, on behalf of investors who sustained losses in Freddie Mac and Fannie Mae Preferred Securities. Claims filed with FINRA allege that investors were solicited to invest in such products through fraudulent misrepresentations and fraudulent omission of material facts. The actual risks associated with investing in Fannie Mae and Freddie Mac preferred stocks were not accurately and fully disclosed to those investors seeking conservative investments.
Retail investors were allegedly often told that such investments were as safe and secure as a de-facto government backed bond, when, in reality, such was not the case. Preferred stocks of Fannie Mae and Freddie Mac carried significant risks and these risks were simply never disclosed to investors. Investors were not told that preferred stocks are much more volatile than bonds. Preferred shares have some characteristics that make them unique and much riskier than the guaranteed status of Corporate Bonds, as they were often pitched to be. First, just as with common stock, preferred stockholders in Fannie Mae and Freddie Mac stand behind bond holders in line for the company’s assets if and when it should run into a financial problem. If a company like Fannie or Freddie fails, funds would be repaid to bondholders first. This added extreme default risk to the holders of Fannie and Freddie preferred stock, a risk which was often not disclosed to investors. Bond-holders in Freddie Mae and Fannie Mac were fully protected while preferred stock holders were not. Further, just as with dividends paid on common stock, Fannie Mae and Freddie Mac could have (and indeed did) eliminated preferred dividend payments, an important disclosure fact related to the investment in a product for income purposes.
In or around March of 2008, Fitch Ratings had downgraded Fannie Mae’s preferred stock rating. The Fitch downgrade in the securities rating would not be its last, eventually being downgraded by Moody’s to the lowest investment grade credit rating in August of 2008. Further, on, or around, September 8, 2008, United States Treasury Secretary Henry Paulson announced that Fannie Mae and Freddie Mac would be placed under Federal Housing Finance Agency conservatorship, eliminating all future dividend payments. When Fannie Mae and Freddie Mac were placed in conservatorship by the federal government on September 8, 2008, investors in Freddie Mac and Fannie Mae preferred stock watched their investment become essentially worthless. Fannie Mae and Freddie Mac preferred stock was promoted by investment firms even in the face of the companies’ plummeting financial condition. As reported in a July 7, 2010 article in Forbes titled How Fannie and Freddie Unloaded Their Trash, firms, including Merrill Lynch, earned more than one-third of a billion dollars in fees between November 2007 and June 2008 in relation to such securities. As for the investors in such products, they saw their investments become essentially worthless with the deepening of the U.S. housing crisis. When the federal government seized and took over Fannie Mae and Freddie Mac after the two companies suffered huge loan losses and placed them into conservatorship, such investments were wiped out in almost their entirety.
If you were a victim of such impropriety and have sustained substantial losses by investing in Fannie Mae and/or Freddie Mac Preferred Securities, you may be entitled to recover damages. Please contact the Law Offices of Meissner Associates, which is nationally known for its record win statistics in FINRA Arbitration, toll-free at 866-764-3100 for a free consultation and to explore your legal rights and options.