Articles Posted in Fiduciary Duties

shutterstock_189302963-300x194According to BrokerCheck records financial advisor Christopher McClure (McClure), currently employed by Westport Capital Markets, LLC (Westport Capital) has been subject to at least two customer complaints and a regulatory action brought by the SEC during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), McClure’s customer complaints allege that McClure breached his fiduciary duty among other allegations.

In December 2017 The Securities and Exchange Commission (SEC) Connecticut-based investment advisory firm and its principal, McClure, with breaching their fiduciary duties and defrauding advisory clients by repeatedly purchasing securities that generated significant amounts of undisclosed compensation.

The SEC’s complaint filed in the U.S. District Court for the District of Connecticut alleged that Westport Capital and McClure invested advisory clients’ funds in risky securities that generated hundreds of thousands of dollars in undisclosed mark-ups for Westport and resulted in more than $1 million in losses for clients.  The SEC found that Westport purchased securities from underwriters at a discount to the public offering price and then, acting as a principal for its own account, re-sold those same securities to its advisory clients at higher prices without disclosing the mark-up.  The SEC further alleged that Westport and McClure defrauded a client by acting contrary to the client’s express objectives and instead repeatedly investing the client in risky offerings that generated hidden mark-ups.  Moreover, the SEC also found that Westport and McClure made false and misleading representations to clients regarding the compensation that Westport would receive from their accounts.

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shutterstock_179465345-300x200According to BrokerCheck records financial advisor Gary Meier (Meier), formerly employed by Boz & Company LLC (Boz) and Cambridge Investment Research, Inc. (Cambridge Investment) has been subject to at least eight customer complaints and two regulatory actions.  According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Meier’s customer complaints allege that Meier made was negligent, breached his fiduciary duty, and made unsuitable investments in penny stocks and low priced securities.

In February 2017 the State of Washington Securities Division found that from approximately 2008 to 2017 Meier made unsuitable investment recommendations to his client and engaged in other unethical business practices.  The state found that Meier executed transactions in client accounts without obtaining prior client authority to do so and purchased speculative penny stocks for client accounts.  It was found that Meier purchased the same three penny stocks for nearly all of his clients – Rentech, Cytodyn, or Provectus Biopharmaceutical stock – regardless of their investment profile.  It was found that Meier added to client holdings of these three penny stocks and most of his client accounts were heavily concentrated in these three penny stocks.  These purchases resulted in large losses in client accounts.

Washington State also alleged that Meier mislead clients in order to assuage investor concerns about the penny stocks.  Meier purportedly provided clients with grossly exaggerated future values of the three stocks indicating that large returns in the near future would occur.  Further, it was found that Meier was forced to resign from Cambridge Investment when the firm objected to Meier’s investment practices.  Thereafter, it was found that Meier did not register with another firm until July 14, 2015, with Boz, an investment adviser owned by his son.

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shutterstock_112866430-300x199According to BrokerCheck records financial advisor Jesse Krapf (Krapf), currently employed by Benchmark Investments, Inc. (Benchmark Investments) has been subject to at least one customer complaint and two debt related judgements or tax liens.  According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Krapf’s customer complaints allege that Krapf made was negligent and breached his fiduciary duty to the customer.

In October 2018 a customer filed a complaint alleging that Krapf violated the securities laws including negligence and breach of fiduciary duty causing $500,000 in damages.  The claim is currently pending.

Krapf also has two unsatisfied debts including a $3,247 tax lien from May 2015.  The fact that a broker cannot manage his own personal finances is material information for a client to consider.  In addition, the types of products clients have alleged were unsuitable are high commission products that may be recommended to generate high profits for the advisor at the expense of the client.

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shutterstock_128655458-300x200According to BrokerCheck records financial advisor John Spach (Spach), formerly employed by Kestra Investment Services, LLC (Kestra) has been subject to at least one customer complaint, one regulatory action, and one employment termination for cause.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Spach’s customer complaint alleges that Spach introduced a client of his independent advisory firm to an outside investor. The client allegedly invested $475,000 and received a promissory note that defaulted.

Thereafter, in July 2018 NFP Retirement Inc. (NFP) discharged Spach claiming violations of the Investment Advisers Act of 1940 including co-mingling client assets with his own personal assets, breach of fiduciary duty, unsuitable investment advice, material misstatements, failure to disclose material conflicts of interest, circumvention of compliance policies and procedures, and affirmative misrepresentations to the firm.

Finally, in February 2019 FINRA sanctioned Spach alleging Spach consented to the sanction and findings that he refused to produce documents and information requested by FINRA in connection with its investigation into potential violations relating to a customer complaint.  FINRA found that his former firm disclosed that he had been permitted to resign while under internal review relating to the potential violation of various firm policies while attempting to settle a customer complaint with a client of his registered investment advisor.

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shutterstock_112866430-300x199According to BrokerCheck records financial advisor Steven Reznik (Reznik), formerly employed by Raymond James Financial Services, Inc. (Raymond James) has been subject to at least 15 customer complaints.  According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Reznik’s customer complaints allege that Reznik made unsuitable recommendations by concentrating investors in a particular sector, possibly energy.

In January 2019 a customer brought a complaint against Reznik alleging the broker violated the securities laws by recommending an unsuitable overconcentration in investments, unauthorized trading, and constructive fraud from March 2012 until August 2018.  The claim is currently pending.

In November 2018 a customer brought a complaint against Reznik alleging the broker violated the securities laws by recommending an unsuitable overconcentration in investments, unauthorized trading, and breach of fiduciary duty from September 2016 until October 2018.  The claim alleged $125,000 in damages and is currently pending.

In October 2018 a customer brought a complaint against Reznik alleging the broker violated the securities laws by recommending an unsuitable investments, fraud, and breach of fiduciary duty from February 1996 until September 2018.  The claim is currently pending.

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shutterstock_76197331-300x200According to BrokerCheck records financial advisor Wesley Clinton (Clinton), currently employed by Network 1 Financial Securities Inc. (Network 1 Financial) has been subject to eight customer complaints during his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), the complaints against Clinton concern allegations of unsuitable investments among other allegations.

In August 2018 a customer complained that Clinton recommended investments that violated the securities laws including unsuitable investments and failure to supervise.  The customer alleged $145,000 in damages.  The claim is currently pending.

In January 2017 a customer complained that Clinton recommended unsuitable investments leading to $50,000 in damages.  The claim is currently pending.

In June 2015 a customer complained that Clinton recommended unsuitable investments and engaged in fraud and churning leading to $250,000 in damages.  The claim settled for $30,000.

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shutterstock_156972491-300x198According to BrokerCheck records financial advisor Peter Bittermann (Bittermann), currently employed by Westminster Financial Securities, Inc. (Westminster Financial) has been subject to three customer complaints, one employment termination for cause, and one regulatory action.  According to records kept by The Financial Industry Regulatory Authority (FINRA), most of Bittermann’s customer complaints allege that Bittermann made unsuitable recommendations.

In July 2018 the Wisconsin Division of Securities alleged that Bittermann was delinquent on certain taxes causing his registration to be revoked.

In February 2011 RBC Capital Markets Corporation, LLC (RBC) terminated Bittermann over allegations that he sold a security without prior verbal knowledge and consent by the client.

In August 2009 a client complained that Bittermann misrepresented the risks of an investment and it was unsuitable causing $1,619,634 in damages.  The claim was settled for $750,000.

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shutterstock_103079882-300x239According to BrokerCheck records financial advisor Marc Steinberg (Steinberg), currently employed by Westpark Capital, Inc. (Westpark Capital) has been subject to five customer complaints in his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), many of the complaints against Steinberg concern allegations of unsuitable investments.

In April 2018, a customer complained that Steinberg engaged in unsuitable investments causing $39,796 in damages.  The claim was denied by the firm.

In November 2016, a customer complained that Steinberg engaged in unsuitable investments from December 2012 until February 2015 causing $16,833 in damages.  The claim was denied by the firm.

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shutterstock_184430645-300x225The investment fraud attorneys at Gana Weinstein LLP are currently investigating American Portfolios Financial Services, Inc. (American Portfolios) broker Jimmy Kuhn (Kuhn). According to BrokerCheck Records kept by the Financial Industry Regulative Authority (FINRA), Kuhn has been subject to four customer disputes. The majority of these concern unsuitable investments, breach of fiduciary duty, and excessive use of margin.

In January 2018, a customer alleged that Kuhn had breached his fiduciary duties, and had placed the customer in unsuitable investments. This case was settled at $70,000.

In December 2015, a customer alleged that Kuhn had breached fiduciary duties, placed the customer into unsuitable investments, misrepresented the investments, and executed unauthorized trades in the account. The dispute was settled at $60,000.

In November 2008, a customer alleged that his margin account was much larger than he had authorized, and that this excessive use of margin led to great damages in his account. The dispute was settled at $150,000.

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shutterstock_99315272-300x300According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former Newbridge Securities Corporation (Newbridge Securities) broker Edward Klug (Klug) left the securities industry in May 2018 after disclosing several large tax liens in the prior years.  Klug has made seven financial related disclosures and lists four customer complaints.  The customer complaints against Klug allege churning or excessive trading.

In March 2018 Klug disclosed a $141,711 tax lien against him.  In May 2017, Klug disclosed a $482,714 tax lien against him.  Prior to that, in April 2016 Klug disclosed a $44,229 tax lien against him.  Such disclosures on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services.  FINRA discloses information concerning a broker’s financial condition because a broker’s inability to handle their own personal finances has also been found to be material information in helping investors determine if they should allow the broker to handle their finances.

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.