Articles Posted in Failure to Supervise

shutterstock_184430645-300x225According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA), in November 2016, Thomas Oliphint (Oliphint) was discharged and terminated by LPL Financial LLC (LPL) over allegations that Oliphint violated firm policy regarding outside business activities.  Oliphint has two other customer complaints on his record.  In the industry all such activities must be disclosed and approved by the firm before the broker can engage in them.

According to Oliphint’s disclosures his outside business activities include Oliphint Associates, LLC d/b/a One Advocate Group and Grand Purpose Advocate.  At this time it is unclear what outside business activity Oliphint was engaged in that led to his termination.  However, the risk to investors is that the broker will use such businesses to engage in unauthorized securities activities.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  Brokerage firms are responsible for supervising and preventing such activities.

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shutterstock_94127350-300x205The investment lawyers of Gana LLP are investigating Waddell & Reed Inc.’s (Waddell & Reed) termination of former broker Paul Stanley (Stanley) working out of the Edmond, Oklahoma office.  Stanley had been in the industry for 16 years and was a licensed supervisor with the firm.  Waddell & Reed terminated Stanley in January 2016.  According to the broker’s Financial Industry Regulatory Authority (FINRA) BrokerCheck filing the firm stated that Stanley was “terminated for violation of firm’s Professional Conduct, Supervisory and Compensation Policies following firm investigation evidencing that Principal failed to provide complete information during firm’s internal investigation, suggested to [registered representative] under Principal’s supervision they also not provide complete information during firm’s internal investigation, allowed [registered representative] who was not properly licensed to participate in solicitation of investment advisory business, directed [registered representative] to conduct firm business during an internal firm-imposed administrative suspension, directly compensated [registered representative] outside of firm compensation policies, failed to intercede in the sharing of investment advisory compensation between [registered representative] outside of firm compensation policies and where [registered representative] were not all properly licensed for the products at issue, emailed firm business to [registered representative] on [registered representative] outside email account, and improperly managed client paperwork.”

Subsequently, in March 2017 FINRA barred Stanley when Stanley consented to the sanction and bar for refusing to appear for on-the-record testimony requested by FINRA.

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shutterstock_187532303-300x200Our firm is investigating claims made by various regulators and brokerage firms including the State of Washington against broker Douglas Donnelly (Donnelly), formerly associated with brokerage firms Wells Fargo Advisors, LLC (Wells Fargo), Northwest Asset Management (Northwest), and Dinosaur Financial Group, L.L.C. (Dinosaur Financial).  The allegations revolve around the offering of investments outside of the brokerage firm –a practice known in the industry as “selling away”.  Often times brokers who engage in this practice use outside businesses in order to market their securities.  According to The Financial Industry Regulatory Authority’s (FINRA) brokercheck records Donnelly has been subject to two customer complaints, two regulatory events, and two terminations for cause.  Donnelly has also disclosed outside business activities including Passing Time Winery and Concert Wealth Management.

One of the regulatory events involves claims by the State of Washington alleging that in June 2010, Donnelly began to invest $200,000 in a private placement. Thereafter, Washington alleged that Donnelly sent information about the private placement to potential investors from his Wells Fargo email account.  It was also alleged that Donnelly held meetings at his Wells Fargo office to introduce his Wells Fargo clients to the company’s personnel and provided disclosure information about the company to potential investors.  Washington found that Donnelly introduced approximately 40 individuals to the private placement who invested approximately $4,000,000. Washington found that Wells Fargo investigated and terminated Donnelly for introducing firm clients to the private placement without written approval.

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shutterstock_32215765-300x200The securities and investment lawyers of Gana LLP are investigating customer complaints filed with the Financial Industry Regulatory Authority (FINRA) against broker Malcolm Segal (Segal). According to FINRA’s BrokerCheck record, there are at least 11 disclosures on Segal’s record including customer complaints, multiple regulatory actions, and one employment separation from Aegis Capital Corp. The customer complaints against Segal allege misappropriation of customers’ funds, negligence, breach of fiduciary duty, and breach of contract.

Throughout his career with Aegis, Segal received number customer complaints:

January 2016: Alleging misappropriation of funds and misrepresentation. The damage amount requested is $135,000.00. This complaint is currently pending.

shutterstock_61142644-300x225Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) against broker Mark Schklar (Schklar).  According to brokercheck, FINRA made a preliminary determination to recommend that disciplinary action be brought against Schklar concerning potential violations including private securities transactions, borrowing from/lending to a customer, making false attestations on annual compliance questionnaires, and false statements to FINRA.  In addition, Schklar has been subject to five customer complaints over his career.

At this time it is unclear the total scope and extent of these outside business activities and private transactions.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  Often times brokers who engage in this practice use outside businesses in order to market their securities.

Schklar entered the securities industry in 1991.  From January 2006 until January 2013 Schklar was associated with Scott & Stringfellow, LLC.  From November 2012 until January 2015 Schklar was associated with BB&T Securities, LLC.  Finally, from January 2015 until May 2016 Schklar was associated with Ridgeway & Conger, Inc. out of the firm’s New Woodstock, New York office location.

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shutterstock_1832895-300x199Our firm is investigating claims made by LPL Financial LLC (LPL) when the firm terminated broker David Garces (Garces).  According to the firm, Garces was discharged in July 2016 after allegation were made that Garces engaged in an outside business activity without prior notification to the firm.

According to Garces brokercheck records Garces has disclosed only one outside business activity called TMS Merchant Solutions which Garces is the president of and is involved in selling credit card terminals.  It is unclear if other business activities are involved in LPL’s allegations.  However, often times undisclosed outside business activities are used by brokers to provide loans or sell of notes and other investments to clients outside of a brokerage firm.  These types of transactions constitute impermissible private securities transactions – a practice known in the industry as “selling away”.  Often times brokers who engage in this practice use outside businesses in order to market their securities.  At this time it is unknown and has not been alleged that Garces engaged in selling away.

Garces entered the securities industry in 2012.  From March 2012 through April 2013 Garces was associated with Metlife Securities Inc.  Thereafter, from February 2015 until August 2016, Garces was registered with LPL out of the firm’s Brooklyn, New York office location.

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shutterstock_180341738Our investment attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Michael DiGaetano (DiGaetano) currently associated with Independent Financial Group, LLC (Independent Financial) alleging unsuitable investments, misrepresentations, fraud, negligence, breach of contract, and breach of fiduciary duty among other claims.  According to brokercheck records DiGaetano has been subject to three customer complaints and one regulatory sanction.

In May 2012 FINRA sanctioned DiGaetano alleging that as a supervisor he failed in responsibilities by not taking reasonable action to prevent another broker from committing securities fraud.  (FINRA No. 2009019209202) As part of the claim, FINRA alleged that DiGaetano failed to even contact customers who were subject to fraudulent mutual fund switches and never questioned the broker involved even though the trades were marked as unsolicited.

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shutterstock_93851422The investment lawyers of Gana LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Christopher Burtraw (Burtraw) working out of Lakewood, Colorado alleging that the broker borrowed client funds.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  According to the FINRA regulatory action (FINRA No. 20150472061-01) Burtraw consented sanctions in the form of a permanent bar because he failed to provide documents and information requested by FINRA during the course their investigation into allegations that he borrowed funds from multiple customers.

At this time it unclear the nature and scope of Burtraw’s outside business activities and private securities transactions.  However, according to Burtraw’s public records his outside business activities includes Pacific Life Prestige Wealth Management Group.  Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance agents to clients of those side practices.

Burtraw entered the securities industry in 2003.  From September 2004 until November 2009, Burtraw was associated with LPL Financial Corporation.  From November 2009 until November 2014, Burtraw was associated with Purshe Kaplan Sterling Investments.  Finally, from November 2014 until October 2015, Burtraw was associated with J.P. Turner & Company, L.L.C. (JP Turner).

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shutterstock_153463796The investment lawyers of Gana LLP are investigating a customer complaint brought before the Financial Industry Regulatory Authority (FINRA) against Gerald “Jerry” Tagge (Tagge) working out of Omaha, Nebraska alleging the sale of $125,000 in promissory notes.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  In addition to the promissory note complaint there have been two other customer complaints against Tagge.

At this time it unclear the nature and scope of Tagge’s outside business activities and private securities transactions.  However, according to Ingros’ public records his outside business activities include the d/b/a he operates out of Tagge Rutherford Financial Group, an insurance business, and real estate related business. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance agents to clients of those side practices.

Tagge entered the securities industry in 1991.  Since August 2006 Tagge has been associated with Cetera Advisors LLC.

In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm.  However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion.  In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public.  Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system.  Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

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shutterstock_61142644The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Tracy Wengert (Wengert) (FINRA No. 2015044289201) resulting in a bar from the securities industry alleging that Wengert failed to provide FINRA staff with information and documents requested. The failure to provide those documents and information to FINRA resulted in an automatic bar from the industry. FINRA’s document requests related to the regulators investigation into claims in February 2015, FINRA enforcement began investigating allegations of misconduct by Wengert in that he opened brokerage accounts outside of the Transamerica Financial Advisors, Inc. (Transamerica) on behalf of customers and placed unsuitable trades in these accounts.

FINRA’s investigation appears to stem from Wengert’s termination from Transamerica in January 2015. At that time Transamerica filed a Form U5 termination notice with FINRA stating in part that the firm discharged Wengert under circumstances where there was allegations that Wengert was alleged to have managed a client account on a discretionary basis without approval or oversight through the firm.

Wengert entered the securities industry in 1999. From April 2002 until January 2012, Wengert was associated with World Group Securities, Inc. Thereafter, from January 2012 until February 2015, Wengert was associated as a registered representative with Transamerica.

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