Articles Posted in Failure to Supervise

According to BrokerCshutterstock_180968000-300x200heck records kept by The Financial Industry Regulatory Authority (FINRA) former advisor Jeffrey Schwebach (Schwebach), formerly associated with Independent Financial Group, LLC (Independent Financial) in Dell Rapids, South Dakota was terminated by the firm.  In June 2018 Schwebach was discharged after the firm claimed that he failed to accurately describe the nature of his outside business activities (OBAs) and also violated firm policy with regard to disclosure of customer complaint.  There are no other public disclosures on Schwebach’s record.

At this time it is unclear the nature or scope of the alleged OBAs and if such activity included private securities transactions.  Schwebach’s public disclosures show that he has disclosed numerous OBAs including The Cartwright Bros, a landlord rental business, 50% owner of Schwebach Financial – a d/b/a company.  In addition, Schwebach has disclosed he is a radio DJ for Backyard Broadcasting, 50% owner of Dells Mini Storage, 20% owner of Schwebach Family Partnership, and instructor for a retirement course, board member of Planning Life, and a radio DJ ofr Midwest Communications, among other disclosures.

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shutterstock_102217105-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former advisor Philip Nalesnik (Nalesnik), formerly associated with LPL Financial, LLC (LPL Financial) in Pottsville, Pennsylvania was terminated by the firm.  In July 2018 Nalesnik was discharged after the firm claimed that he was in violation of firm policy regarding outside business activities and failed to timely and completely respond to firm inquiries.

In addition, Nalesnik has several reported tax liens including a $4,573 lien in September 2017 and a $7,847.61 lien in July 2012.

At this time it is unclear the nature or scope of the alleged OBAs and if such activity included private securities transactions.  Nalesnik’s public disclosures show that he operated Ridgeview Wealth Management a d/b/a entity.  In addition, Nalesnik owned Integrated Insurance Management LLC.

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shutterstock_102217105-300x200The securities attorneys at Gana Weinstein LLP are currently investigating Aeon Capital Inc (Aeon Capital) broker Wayne Miller (Miller). According to BrokerCheck Records held by the Financial Industry Regulatory Authority (FINRA), Miller has been subject to three customer disputes, a regulatory action, and a financial action.

In December 2017, FINRA suspended Miller for failing to properly supervise his firm’s chief compliance officer (CCO) and direct supervisor as the member firm’s president. Miller also failed to respond to red flags that the system of supervision was deficient and that the CCO was not properly supervising the registered representatives of the firm. During the time, a registered representative at the firm was employing an unsuitable “swing trade” strategy by excessively trading mutual fund “A” shares in customer accounts. The CCO informed Miller that one of the registered representatives of the firm was excessively trading mutual fund “A” shares in customer accounts, and Miller did not contact the mutual fund customers – which could’ve led him to learn about 11 of the other affected customers. Miller also failed to properly supervise the CCO – who demonstrated her difficulty with analyzing the firm’s trade blotter and mutual fund switch reports even with the help of a compliance consultant. Consequently, Miller incurred a fine of $10,000 and was suspended for 6 months.

In addition, Miller has been subject to multiple customer complaints. In August 2018, a customer alleged that Miller misrepresented investments, over-concentrated the customer account, breached fiduciary contract and duty, and was negligent with the customer funds. The case was settled at $95,000.

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shutterstock_61142644-300x225The investment fraud attorneys at Gana Weinstein LLP are currently investigating Chelsea Financial Services (Chelsea Financial) broker George Warner (Warner). According to BrokerCheck Records, Warner has been subject to a regulatory matter in which the Financial Industry Regulatory Authority (FINRA) sanctioned Warner for the violation of the securities laws.  In addition, Warner has been subject to termination from two firms of employment and a customer complaint.

In November 2014, Warner was permitted to resign from NFP Advisor Services for changing customer documents and information after the clients had signed the documents.  In June 2013, Warner was discharged from LPL Financial LLC for getting customer signatures on account transfer forms that were blank.

Subsequently, in April 2017, FINRA found that Warner altered customer documents without customer knowledge or permission on over five occasions in which he included customer liquidity needs, net worth, annual income, alternative investment forms, and an IRA application. By altering the firm’s documents, Warner impeded on the firm’s ability to maintain accurate records. Without admitting or denying the findings, Warner consented to the sanctions and to the entry of findings. Consequently, FINRA imposed a $5,000 fine and 30 day suspension.

In addition, Warner has been subject to a customer dispute. In August 2009.  a customer alleged that Warner purchased CIT bonds instead of CITI Corp bonds. The case was settled at $225,000.

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shutterstock_63635611-300x200The securities attorneys at Gana Weinstein LLP are currently investigating Founders Financial Securities LLC (Founders Financial) broker Timothy Lofton (Lofton). According to BrokerCheck Records, Lofton has been subject to termination from employment due to alleged outside business activities. In addition, Lofton has been subject to three customer disputes concerning unsuitable investments.

Most recently, in April 2018, Horter Investment Management discharged Lofton for failing to follow the company’s policy regarding outside business activities.

In October 2009, a customer alleged that Horter recommended securities that were unsuitable for the customer in terms of the customer’s age and misrepresented the material facts of the investment. The customer requested $5,000 in damages.

In May 2016, Lofton filed for bankruptcy due to corporate debt. Bankruptcy is a potential sign that financial advisors are struggling with their finances. The Financial Industry Regulative Authority (FINRA) makes this information public so that investors can have a better sense of their brokers.

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shutterstock_172034843-300x200The securities attorneys at Gana Weinstein LLP are currently investigating Royal Alliance Associates, Inc. (Royal Alliance) broker Gregory Hill (Hill). According to BrokerCheck Records, Hill has been subject to one pending customer dispute and tax lien. In addition, Hill has been subject to termination from employment. The majority of these concerns allege the firm’s failure to supervise.

In August 2017, a customer alleged that Hill’s firm of employment failed to supervise Hill’s inappropriate sale of a variable annuity to the customer. The client has requested $1,185,056 in damages. This dispute is currently still pending.

In addition, in December 2010, ING Financial Partners, Inc. terminated Hill for failing to report his three tax liens on the U4 form.  Hill has also been subject to a tax lien. In June 2010, Hill incurred a tax lien of $86,263.

shutterstock_182371613-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Joseph Pratte (Pratte), formerly associated with Signator Investors, Inc. (Signator Investors) in Riverside, California was terminated by his firm concerning allegations he engaged in prohibited outside business activity (OBA) and failed to submit the activity to the firm for approval as required.

Thereafter, in May 2018 FINRA sought to question Pratte concerning his OBA.  FINRA found that Pratte failed to cooperate with the investigation.  Accordingly, FINRA determined that Pratte consented to the sanction and to the entry of findings that he refused to provide information in response to FINRA requests made to review Pratte’s outside business activities.

At this time it is unclear the extent of Pratte’s outside business activities or if private securities transactions were involved.  However, Pratte disclosed that he was engaged in a rental property business.

shutterstock_143448874-300x199The securities attorneys at Gana Weinstein LLP have been investigating previously registered broker Matthew Kerby (Kerby). According to BrokerCheck Records, in January 2018, Kerby was barred from the financial industry by the Financial Industry Regulative Authority (FINRA) for withholding crucial documents from FINRA involving a prior investigation in which Kerby allegedly converted elderly customer funds. Kerby consents to the sanctions that he received FINRA’s request and failed to produce documents. By refusing to provide requested documents, Kerby violated FINRA Rules 8210 and 2010.   At this time it is unclear the extent and nature of the appropriation that occurred.

In addition, Kerby has been subject to termination from employment. Kerby’s employer, Edward Jones, terminated Kerby in November 2017 alleging that Kirby misappropriated and converted customer funds to utilize them for personal benefit.

Kerby has also been subject to a customer complaint. In November 2017, a customer alleged that Kerby misappropriated the customer’s funds by taking the money out of the account and converting the funds without customer authorization. The dispute was settled at $78,985.80.

shutterstock_110076890-300x233According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA), broker David Reynolds (Reynolds) was barred in November 2017 from the financial industry for concerning allegations that he misappropriated customer funds and did not provide requested documents to FINRA. According to FINRA, Reynolds consented to the sanction and bar due to the fact that he refused to provide requested documents during a period of investigation.   At this time it is unclear the extent and nature of the appropriation that occurred.

Reynolds employer, Allstate Financial Services LLC (Allstate Financial), discharged Reynolds in October 2017 for Reynold’s failure to produce requested documents for the firm’s investigation of his alleged misappropriation of customer funds.

In addition, Reynolds has been subject to a customer complaint. In January 2018, a customer alleged that Reynolds did not return customer’s investment funds to the customer. The dispute settled at $66,654.25.

shutterstock_63635611-300x200The law offices of Gana Weinstein LLP continue to investigate the Woodbridge Group of Companies and the Woodbridge Mortgage Funds (Woodbridge).  The Securities and Exchange Commission (SEC) has alleged that the Woodbridge operated a billion-dollar Ponzi scheme ensnaring about 8,400 investors. Woodbridge solicited hundreds of disreputable insurance agents and investment brokers to sell its false notes that the firm claimed to be backed by mortgages.  In plain sight to regulators, Woodbridge engaged in a nationwide investment fraud by offering the sale of unregistered securities.

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) Gary Forrest (Forrest) appears to be an agent for Woodbridge fraudulent note sales.  Forrest was formerly associated with American Portfolios Financial Services, Inc. (American Portfolios) out of the firm’s Flint, Michigan office location.  Thereafter, the State of Michigan Sanctioned Forrest finding that Forrest offered or sold twelve Woodbridge securities in the State of Michigan which were not federally covered, exempt from registration, or registered, in violation of the securities laws.

Federal securities laws and the FINRA rules require firms to monitor and supervise its employees, like Forrest, 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.  Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including recommending fraudulent investments.