GUEST POST By Steven Madel

As you already know, it can get ugly fast during a divorce. Or, on occasion, the married couple holds no animosity toward one another and is ready to split amicably.

Depending on your particular situation, you may consider arbitration, mediation, or hiring divorce attorneys for a typical divorce.

shutterstock_27597505The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Matthew Silato (Silato).  According to BrokerCheck records there are at least six customer complaints, two financial disclosures, and one criminal matter involving Silato.  The most recent customer complaints against Silato allege a number of securities law violations including breach of fiduciary duty and suitability among other claims.  The most recent claim alleging $250,627 filed in June 2016 is currently pending.  In December 2015, a customer filed a complaint alleging unsuitable investments and claiming $522,941 in damages.  That case is currently pending.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client.  In order to make a suitable recommendation the broker must meet certain requirements.  First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors.  Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

The number of customer complaints against Silato is high relative to his peers.  According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records.  Brokers must publicly disclose certain types of reportable events on their CRD including but not limited to customer complaints.  In addition to disclosing client disputes brokers must divulge IRS tax liens, judgments, and criminal matters.  However, FINRA’s records are not always complete according to a Wall Street Journal story that checked with 26 state regulators and found that at least 38,400 brokers had regulatory or financial red flags such as a personal bankruptcy that showed up in state records but not on BrokerCheck.  More disturbing is the fact that 19,000 out of those 38,400 brokers had spotless BrokerCheck records.

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shutterstock_101456704The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Craig Langweiler (Langweiler).  According to BrokerCheck records there are at least 36 disclosures on Langweiler’s record including customer complaints, multiple regulatory actions, multiple judgments or liens, and a criminal matter. The most recent customer complaints against Langweiler alleges a number of securities law violations including excessive commissions, churning, unauthorized trading, and suitability among other claims.

The most recent regulatory action against Langweiler by FINRA alleges that he willfully failed to amend his Form U4 to timely disclose federal tax liens, totaling approximately $143,000, and civil judgments, totaling approximately $56,700.  FINRA alleged that Langweiler also provided inaccurate and incomplete responses regarding liens and judgments to his employer and he provided inaccurate responses to FINRA.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time.  Often times the account will completely “turnover” every month with different securities.  This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.  Churning is considered a species of securities fraud.  The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions.  A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements.  Certain commonly used measures and ratios used to determine churning help evaluate a churning claim.  These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

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shutterstock_184430612The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Neal Scott (Scott).  According to BrokerCheck records there are at least four customer complaint, one regulatory, and seven judgments or liens that have been filed against Scott.  The most recent customer complaint against Scott alleges a number of securities law violations including breach of fiduciary duty and suitability among other claims.  The claim is currently pending.

The most recent judgement or lien disclosure was filed in January 2009 and concerns a tax lien for $47,103.  Tax liens and judgements are often a sign that the broker cannot manage their own personal finances and may be tempted to recommend high commission products or strategies to clients in order to satisfy debts.

In addition, the Virginia Securities Department alleged that Scott failed to complete his registration process in time and denied his registration in the state.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client.  In order to make a suitable recommendation the broker must meet certain requirements.  First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors.  Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

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shutterstock_53865739According to the Wall Street Journal, The Securities and Exchange Commission (SEC) is preparing an enforcement action against brokerage firm Merrill Lynch over an investment that collapsed losing investors as much as 95% of their initial investment.  According to the financial advisors at the firm, the advertising and marketing for the product was called “borderline crooked.”

The SEC action involves a product called Strategic Return Notes that Merrill began selling in 2010 and raised about $150 million for.  Market-Linked Notes to generate are structured product investments that create returns through the use of embedded derivatives designed to track the performance of a security, index, commodity or currency.  Brokerage firms like Merrill Lynch have perverse incentives to market these proprietary products over safer and cheaper alternative investments.  Structured Products like Market-Linked Notes often have substantial fees and/or commissions paid to affiliated companies for banking, underwriting, asset management, and ultimately broker commission.

The Strategic Return Notes in question are linked to a Merrill Lynch index tracking the volatility of the S&P 500 stock index.  According to the Wall Street Journal, the five-year notes lost value rapidly as market volatility fell and the cost of buying the options that allow the note to track the index rose sharply.  Because of the substantial costs of the options, volatility based investments tend to lose money over the long term no matter what the performance of the underlining index is.  According to the article, roll costs for the options averaged an astounding 12% of the principal per quarter in the first half of 2011, before falling to less than 4% per quarter in the second half of the year.  However, clients and brokers alike claim they were never told the costs could grow so large.

In fact, two advisors who felt misled about the product recorded the calls in August 2011, moved to UBS in July 2012, and then submitted a whistleblower complaint to the SEC the following September alleging that the notes are defective products.

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shutterstock_27597505The attorneys of Gana LLP recently filed a Statement of Claim on behalf of a client against Mutual Securities, Inc. (Mutual Securities), NOVA Financial LLC (NOVA), and financial advisor Jacob “Jake” Kagele (Kagele) alleging that the firms provided unsuitable investment advice that overconcentrated the Claimant in risky assets including foreign debt, oil and gas related investments, and Puerto Rico bonds.  The Claimants alleged damages of over $4.3 million.

The Statement of Claim alleges that the Claimant sold a successful business to fund his retirement account that would allow him to live off of the income and one day build a home for himself.  The Statement of Claim alleges that the Respondents, on a discretionary basis, lost over $2,300,000 investing in in energy and commodity related investments.  The complaint stated that Kagele was extremely bullish on energy and commodities and invested substantial sums in oil and metals related investments, including Petrobras, Transocean, Cliffs, Vale, Freeport-McMoRan, Barrick, Kinross, and others, even when these sectors were in a major down turn.

One of the investments that led to catastrophic losses in Claimants’ accounts was iPath S&P GSCI Crude Oil Total Return Index ETN (Symbol: OIL) in which Claimants lost $1.5 million.  OIL is a speculative ETN that attempts to “reflect[] the returns that are potentially available through an unleveraged investment in the West Texas Intermediate (WTI) crude oil futures contract.”

According to the Statement of Claim, in December 2014, after the price of oil had fallen 50% in value since June 2014, Kagele told Claimant that the reason his account was down is because of oil prices and that the price decline represented an opportunity.  Kagele recommended that Claimants invest heavily in oil through OIL because it was directly linked to the price of oil.

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shutterstock_180412949The law offices of Gana LLP recently filed a statement of claim with FINRA on behalf of their 60 year old client concerning inappropriate investments in private placements, non-traded real estate investment trusts (Non-Traded REITs), low priced securities, and private securities transactions.  The complaint was filed against Newbridge Securities Corporation (Newbridge) and alleges that the firm’s broker Dennis Hayes (Hayes) recommended these unsuitable transactions.  In total the Claimant alleges approximately $750,000 in damages.

According to the Statement of Claim, the Claimant divorced her husband in 2012 leaving her with approximately $1,500,000 in assets of which $500,000 was non-qualified money and about $1 million was qualified IRA funds. Claimant explained to Hayes that her goals were to protect her assets while providing her with returns to meet her immediate income needs.  Shortly after transferring the funds, Hayes solicited the Claimant to invest in a gold fund called USA Gold.  According to the complaint, Hayes recommended $300,000 in USA Gold through a self-directed IRA account.

The complaint alleges that after a diligent search there appears to be no Regulation D filing for a private placement for USA Gold and no evidence of any registration of the offering.  USA Gold appears to be an unregistered securities offering and most likely an investment scam.  Even more shocking is that Newbridge has failed to properly investigate and terminate Hayes for his involvement in the unregistered offering thereby continuing to place investors at risk. According to the Statement of Claim, Claimant complained to Gene Robert Abrams (Abrams), Newbridge’s General Counsel and Co-Chief Compliance Officer that Hayes was involved in private securities transactions.

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shutterstock_59949436The securities lawyers of Gana LLP are investigating the regulatory complaint filed by The Financial Industry Regulatory Authority (FINRA) against broker Thomas Schober (Schober).  The FINRA regulatory action alleges that Schober recommended unsuitable variable annuity exchanges in the accounts of two senior customers ages 84 and 83.  According to FINRA, one of the customers held power of attorney for the other who suffered from dementia and both customers were conservative investors with limited financial means who relied on the income from their investments.  FINRA found that Schober effected the annuity exchanges to benefit himself at the customers’ expense. The exchanges caused the customers to pay total surrender charges of approximately $154,642 to sell their annuities and then to pay sales charges of approximately $69,000, of which Schober received approximately $65,000 in commissions, and incurred new surrender periods.

FINRA found that Schober never disclosed to them the amount of the surrender charges they would incur to sell their annuities and didn’t explain the sales charges associated with the purchase of the new annuities or that they would be subject to new surrender periods.  FINRA found that Schober attempted to conceal the unsuitable annuity exchanges by providing false information concerning the source of funds on the annuity transaction documents.

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shutterstock_85873471The securities lawyers of Gana LLP are investigating customer complaints against broker Cory Bataan (Bataan).  There are at least four customer complaints against Bataan and one employment termination for cause.  The customer complaints against Bataan allege a number of securities law violations including that the broker engaged in churning, unauthorized trading, unsuitable trades, breach of fiduciary duty, and misrepresentations among other claims.  In addition, in August 2012, Empire Asset Management terminated Bataan alleging that their were violations of the firms policies and procedures.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time.  Often times the account will completely “turnover” every month with different securities.  This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.  Churning is considered a species of securities fraud.  The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions.  A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements.  Certain commonly used measures and ratios used to determine churning help evaluate a churning claim.  These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

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shutterstock_179203760The securities lawyers of Gana LLP are investigating a customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Andrew Topka (Topka).  According to BrokerCheck records Foote has been subject to at least two customer complaints.  The customer complaints against Topka allege securities law violations that including unsuitable investments and misrepresentations among other claims.   Many of the complaints involve direct participation products (DPPs) and private placements including non-traded real estate investment trusts (REITs), oil and gas private placements, and other alternative investments.

Our firm has represented many clients in these types of products.  All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds.  For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed.  However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them.  Further, investor often fail to understand that they have lost money until many years after agreeing to the investment.  In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client.  In order to make a suitable recommendation the broker must meet certain requirements.  First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors.  Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

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