Articles Posted in Securities Fraud

shutterstock_176534375-300x198Our securities fraud attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Michael Siegel (Siegel) formerly associated with National Securities Corporation – d/b/a HudsonPoint Capital – alleging Siegel engaged in a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.  The claim filed in July 2016 seeks $2,016,064 in damages.

Thereafter, FINRA barred Siegel from the securities industry alleging that the broker failed to respond to the regulator’s requests for documents and information.

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shutterstock_185219444-300x278Our securities fraud attorneys are investigating a complaint filed by The Financial Industry Regulatory Authority (FINRA) against Brian Egan (Egan) formerly associated with Independent Financial Group LLC (Independent Financial) alleging that the broker failed to disclose his trading activity in client accounts away from the firm.  According to brokercheck records Egan has been subject to one employment termination for cause by Independent Financial in July 2015 for failing disclose personal trading in accounts away from the firm.

In August 2016 FINRA sanctioned Egan alleging that he consented to the entry of findings that Egan maintained and/or held trading authority in a total of 87 brokerage accounts for himself and over 60 customers at another brokerage firm. The customer accounts over which he held trading authority included both Egan’s family members and customers of his CPA business.  FINRA found that Egan did not notify Independent Financial of his involvement in these accounts when he became associated with the firm, or at any other time.  FINRA found that Egan exercised his trading authority in the accounts at the other firm to execute trades and to transfer funds and securities from certain of the customer accounts to his own accounts.

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shutterstock_133100114Our firm is investigating potential securities claims against brokerage firms for sales practice violations related to the recommendations of oil & gas and commodities products such as exchange traded notes (ETNs), structured notes, private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and individual stocks.

One investment that advisors may be recommending to clients in order to gain exposure to oil is the iPath S&P GSCI Crude Oil Total Return Index ETN (Symbol: OIL).  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.”  Brokers may be recommending OIL for long-term holding when, in fact, OIL is a risky ETN that is only appropriate for short-term investment speculation on the price direction of oil.

As Morningstar has written, “Due to the extremely specialized exposure of the fund, investors should only consider it for a small position in the satellite portion of a broadly diversified portfolio.”  MorningStar also explained how the futures invested in the fund make the investment inappropriate for long-term holdings and how the price of the fund is not related to the price of oil.  “For example, in 2013 OIL increased 5.6%, close to WTI’s spot price gain of 6.9% for the year. However, over the trailing five-year period OIL lost 1% annualized, compared with an annualized gain of more than 20% for spot WTI over the same period.”

In other words even if the price of oil increases on an annualized basis by 20% an investor in OIL can still lose money.  Investors often times do not realize that index ETNs designed to track certain assets may not be successful in doing so and may be subject to different types of risks other than those of the underlining value of the asset.

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shutterstock_54385804Our investment attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against David White (White) currently associated with Centaurus Financial, Inc. (Centaurus) alleging unsuitable investments and breach of fiduciary duty among other claims.  According to brokercheck records White has been subject to eleven customer complaints.  Many of the complaints involve direct participation products (DPPs) such as non-traded real estate investment trusts (REITs) and other alternative investments.

Our firm has experience representing investment fraud victims with these investments against Centaurus.  See Gana LLP Wins Arbitration Award On Behalf of Client Against Centaurus Financial.  In that case, the Claimant alleged that the broker involved invested over $2,000,000 in exclusively high cost products and 50% of those investments were in alternative investments such as private placements, oil and gas partnerships, and REITs.  The other 50% was invested in variable and equity-indexed annuities.  The panel found that “the investments Hashemian recommended while at Centaurus were not suitable and in [Claimant’s] best interests. [Claimant] also provided sufficient evidence to meet her burden of proof to support her allegations in her Statement of Claim that the actions by Hashemian, for which Centaurus is responsible, constitute fraudulent and negligently made material misrepresentations and omitted material information in the sale of the investments to [Claimant].”  Award Can Be Found Here.

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shutterstock_101456704Investment attorneys at Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against John Cangialosi (Cangialosi) alleging unsuitable investments, fraudulent and negligent acts, breach of contractual requirements, churning, and negligent misrepresentation among other claims.  According to brokercheck records Cangialosi has been subject to five customer complaints, two financial disclosure – one bankruptcy and one tax liens, one employment separation for cause, and two regulatory events.

In April 2013, FINRA found that Cangialosi violated FINRA rules that require the timely disclosure judgments or liens.  In this case FINRA found that Cangialosi failed to timely disclose six liens and fined him $5,000 and suspended Cangialosi for three months.  In January 2016 the state of Michigan denied Cangialosi’s application to engage in securities business in the state on the grounds that Cangialosi engaged in dishonest and unethical practices within the last 10 years supporting the denial of his registration application.

In 2009 J.P. Turner & Company, LLC permitted Cangialosi to resign after allegations were made that the broker engaged in unauthorized trading in a client’s account.

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shutterstock_173088497Records kept by The Financial Industry Regulatory Authority’s (FINRA) concerning broker Joel Burstein Jr. (Burstein) reveal ten recently filed customer complaints.  The customer complaints against Burstein involve claims of common law fraud, negligence, violation of Florida Statute 726 (fraudulent transfers), aiding and abetting, unsuitable recommendations, and breach of fiduciary duty among other claims.  These claims allege hundreds of millions in investor losses.

The claims appear to be related to actions taken by the Securities and Exchange Commission (SEC) in a fraud complaint against Ariel Quiros and William Stenger alleging that they and their companies made false statements and omitted key information while raising more than $350 million from investors to construct ski resort facilities and a biomedical research facility in Vermont.

Raymond James was then named in a lawsuit filed by the SEC-appointed receiver.  According to news sources, investors were told they were investing projects connected to Jay Peak Inc. ski resort operated by Mr. Quiros and Mr. Stenger.  While investor money was supposed to be used for to finance specific projects the operators, in Ponzi scheme fashion, used money from investors in later projects to fund deficits in earlier projects.

The SEC did refer to Raymond James throughout the complaint as the firm that received wire transfers beginning in 2008 from a bank in Vermont to brokerage accounts controlled by Mr. Quiros.  According to the complaint those wire transfers were investors’ money slated for the Jay Peak resort which Mr. Quiros later borrowed against in the Raymond James accounts with high interest margin loans.

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shutterstock_52426963The securities lawyers of Gana LLP are investigating a customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Rabinder “Ravi” Deshmukh (Deshmukh).  According to BrokerCheck records Deshmukh has been subject to at least four customer complaints.  The customer complaints against Deshmukh allege securities law violations that including unsuitable investments and excessive margin among other claims.

The most recent claim was filed in June March 2016 and alleges that from 2008 to 2015, the customer was recommended and sold unsuitable, highly concentrated positions in speculative securities. In addition, the customer also alleged that they were recommended to trade on margin and seek compensatory and punitive damages in the amount of $9 million.  The complaint 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.

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shutterstock_19498822In a recent Wall Street Journal Article, it was reported that UBS Group AG sold $1.5 billion of contingent convertible (CoCo) bonds.  According to the article, UBS received about $8 billion of orders for the sale.  These bonds will pay an interest rate of 6.875% and last summer UBS sold $1.6 billion of CoCos at the same rate.  The UBS deal was the first CoCo sale since mid-January due to price drops in February due to worries that Deutsche Bank AG might have missed an interest payment on one of its CoCo bonds.

What exactly are CoCo’s and why should investors be concerned.  CoCos have been a growing type of debt issued by mostly European issuers.  European lenders have sold around 100 billion in CoCos since 2012.

CoCos bear many of the same traits as hybrid preferred securities that were popular right up to the financial crisis.  Like hybrid preferred stock, CoCo’s act as hybrid debt/equity investments.  When times are good they behave like debt providing no growth to investors and only interest payments.  When times get rough these investments behave like equity because investors are unlikely to see returns in the event of bankruptcy.  As a result these investments tend to crash in lock step with a company’s equity.

CoCos are one way that some banks are issuing investments in order to acquire extra capital.  Because of their hybrid structure CoCos can be counted toward a bank’s capital requirements mandated by regulators without raising share capital.  From a bank’s standpoint CoCos are attractive because the cost of capital on the firm’s balance sheet is lower than it is for a share capital increase.  CoCo bonds also have a capital trigger where if the trigger is reached, the CoCo is automatically converted into equity or the nominal value is written off.  The trigger on CoCos can also be activated by a regulatory authority if the bank’s existence threatened.

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shutterstock_175298066The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against former Kovack Securities Inc. (Kovack Securities) broker Andrew Corbman (Corbman).  According to BrokerCheck records Corbman was suspended from the securities industry in February 2016 after FINRA found that he made recommendations that were unsuitable as they were over-concentrated and exposed customers to a risk of loss that exceeded each customer’s risk tolerance and investment objectives.  FINRA found that Corbman also distributed a sales brochure for an alternative mutual fund to his customers that contained information that was misleading.

In addition, Corbman has been subject to at least nine customer complaints, two judgements or liens totaling over $100,000, one bankruptcy filing, and an employment separation for cause.  In 2011 his former employer FSC Securities Corporation terminated Corbman alleging that he used unapproved advertising an email accounts.  The bankruptcy and lien disclosures on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services.  A broker’s inability to handle their personal finances has also been found to be relevant in helping investors determine if they should allow the broker to handle their finances.

In addition, Kovack Securities brokers have been found to be extremely dangerous for investors to trust with their money.  According to a recent study conducted by the Securities Litigation and Consulting Group entitled “How Widespread and Predictable is Stock Broker Misconduct?” the incidents of investor harm at Kovack Securities is extraordinarily high.  The study ranked Kovack Securities as the sixth worst brokerage firm finding that brokers at the firm had over a 28% misconduct rate.  The study stated that investors should stay away from Kovack Securities “Given their coworkers’ disclosure record as of 2014, 83.7% of the brokers at these six firms would be in the highest risk quintile as defined in the FINRA study and should be avoided by investors. The BrokerCheck reports for most of the brokers at these six firms should prominently display a skull and crossbones warning.”

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shutterstock_183525503The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against National Securities Corporation (National Securities) broker Daniel Alcide (Alcide).  According to BrokerCheck records Alcide has been subject to at least three customer complaints and two financial disclosures including a bankruptcy.  The customer complaints against Alcide alleges securities law violations that including unsuitable investments, unauthorized trading, and fraud among other claims.

In December 2015 a customer filed a complaint alleging $150,000 in damage stemming from a fraudulent private placement.  The complaint was denied.  In addition, in 2011 Alcide filed for bankruptcy.  Such disclosures on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services.  A broker’s inability to handle their personal finances has also been found to be relevant in helping investors determine if they should allow the broker to handle their finances.

According to a recent study conducted by the Securities Litigation and Consulting Group entitled “How Widespread and Predictable is Stock Broker Misconduct?” the incidents of investor harm at National Securities is extraordinarily high.  The study ranked National Securities as the third worst brokerage firm finding that brokers at the firm had over a 31% misconduct rate.  The study stated that investors should stay away from National Securities “Given their coworkers’ disclosure record as of 2014, 83.7% of the brokers at these six firms would be in the highest risk quintile as defined in the FINRA study and should be avoided by investors. The BrokerCheck reports for most of the brokers at these six firms should prominently display a skull and crossbones warning.”

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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