Investment Attorney

Customers File Complaints Against Meyers Associates Broker Matthew Silato

July 30, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein 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.

FINRA Sanctions Broker Peyton Jackson Over Outside Business Activities

May 25, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Peyton Jackson (Jackson). According to BrokerCheck records Jackson has been subject to at least eleven customer complaints. The customer complaints against Jackson allege securities law violations that including unsuitable investments, fraud, misrepresentation, negligence, and violations of industry rules among other claims. Many of the complaints involve equities and private placements.

In addition, in April 2016, FINRA settled a regulatory action against Jackson alleging that he failed to disclose certain outside business activities and an outside brokerage account to his employing brokerage firms. According to FINRA, Jackson failed to disclose in writing to his firms that he offered investment banking, investor relations, commercial marketing, and Eastern Europe business development services through an outside entity that he controlled, received compensation for insurance services from another outside entity, and served as a successor trustee on behalf of a third party outside entity. FINRA also determined that Jackson failed to disclose to his firms the existence of a brokerage account that he opened in the name of an outside business entity owned by and controlled by him.

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.

Gana LLP Investigates Investor Losses in Valeant Pharmaceuticals

May 18, 2016 | by Staff Attorney

Until about August 2015, Valeant Pharmaceuticals (Valeant)(Stock Symbol: VRX) was one of the fastest growing pharmaceutical companies on the market. Then its stock price all but collapsed. After shares peaked at more than $260 a share in August of 2015, it is now trading at about $26 a share and is down more than 80 percent since last August.

What happened? According to news sources, as a background Valeant pioneered the financialization of pharmaceuticals. That is the company does not research and sell drugs. Instead, Valeant continually buys rivals in musty and unloved segments of the market to squeeze inefficiencies out of the companies. In other words, it engages in drug arbitrage and hikes drug prices. Remember Martin Shkreli, the executive who hiked up the price of the anti-parasitic pill Daraprim used by AIDS patients by more than 5,000 percent? That’s what Valeant does.

But Valeant racked debt and then lied to investors about its drug sales. After months of scandals which include the firing of its CEO and reshuffling some of the seats on its board of directors the company admitted to some poor accounting practices. Basically, the company recorded drug sales twice. One time when it sold them to mail-order pharmacy company Philidor, and once when Philidor sold them which inflated revenues in 2014 and 2015. The company will re-release almost all of its financial statements which will paint an even bleaker picture of the company. On top of all this the company is the subject of several investigations by Congress and the Securities and Exchange Commission.

Customers File Numerous Complaints Against Broker Marc Jaffe

May 16, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against former Finance 500, Inc. (Finance 500) broker Marc Jaffe (Jaffe). According to BrokerCheck records Jaffe was recently sanctioned by FINRA and discharged by his prior employer in or about September 2015. The FINRA action found that Jaffe failed to timely disclose tax liens on his record. Shortly thereafter, Finance 500 terminated Jaffe for cause stating that the broker entered into a commission sharing agreement in a state where he was not registered.

In addition, Jaffe has been subject to an eye popping 36 customer complaints and two judgements or liens totaling over $700,000 in tax lien debt. The 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.

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.

FINRA Bars Former National Securities Corporation Broker John Labarca

April 27, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against former National Securities Corporation (National Securities) broker John Labarca (Labarca). According to BrokerCheck records Labarca was barred from the securities industry in February 2016 after he refused to provide information and documents requested by FINRA in connection with its investigation of allegations made against Labarca in a statement of claim filed by a customer.

Labarca has been subject to at least three customer complaints and one financial disclosure that was a bankruptcy filing. 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. The customer complaints against Labarca allege securities law violations that including unsuitable investments, unauthorized trading, and breach of fiduciary duty among other claims.

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.”

Broker Investigations: Complaints Against Aegis Capital Broker Shadi “Sean” Barakat

April 11, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Shadi “Sean” Barakat (Barakat). According to BrokerCheck records Barakat has been the subject of at least two customer complaints and two judgements or liens. The customer complaints against Barakat allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, misrepresentations, and churning (excessive trading) among other claims.

One complaint filed in June 2013 alleged $500,000 in damages due to unsuitable recommendations and churning. The complaint was settled. Barakat has disclosed several large tax liens including a $1,758 lien in April 2015 and a tax lien of $14,331 in May 2014. Substantial judgements and liens 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.

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.

Broker Investigation: VSR Financial Broker Timothy Hobbs

April 4, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Timothy Hobbs (Hobbs). According to BrokerCheck records Hobbs is subject to three customer complaints. The customer complaints against Hobbs allege securities law violations that including unsuitable investments and breach of fiduciary duty among other claims. One of the most recent claims appear to largely relate to allegations regarding the inappropriate sale of direct participation products such as limited partnerships, equipment leasing, oil & gas investments, and non-traded real estate investment trusts (Non-Traded REITs) and also variable annuities.

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 variable annuities 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. 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.

Ridgewood Energy Oil and Gas Private Placements

March 23, 2016 | by Staff Attorney

The investment attorneys at Gana Weinstein LLP are investigating the potential unsuitable sales of securities sponsored by Ridgewood Energy Corporation (Ridgewood Energy). Ridgewood Energy is a private upstream oil and gas investment company based in Houston, Texas and Montvale, New Jersey and sponsors several oil and gas private placements and investments.

Ridgewood Energy issued a press release announcing that it had closed its latest private equity fund Ridgewood Energy Oil & Gas Fund III, L.P., its largest fund to date, with total capital commitments of more than $1.9 billion. The Fund is a continuation of Ridgewood Energy’s investment program focused on finding and developing oil in the deepwater Gulf of Mexico. Ridgewood Energy other offerings include Ridgewood Energy Bluewater Institutional Fund, LLC, Ridgewood Energy Bluewater Oil Fund II LLC, Ridgewood Energy Bluewater Oil Fund IV, LLC, Ridgewood Energy Oil & Gas Fund II, L.P., Ridgewood Private Equity Partners Energy Access Fund LLC.

Investors often do not understand the substantial risks of oil and gas private placements. As recently reported in Reuters, when offerings by Atlas Energy LP, another issuer of oil and gas private placements were analyzed, investors only get to see 65-70% of their capital actually put to work on oil and gas projects. Further, the returns on these projects had more in common with running profitable casinos than investments. Reuters found that slightly more than half of 43 private placements Atlas issued over the past three decades investors lost money or just broke even. While investors lost in more than half of the deals in 29 or 67% of those deals, Atlas actually out-performed their own investors.

Baytex Energy Corp. (BTE) Investor Loss Recovery

March 19, 2016 | by Staff Attorney

The investment attorneys with Gana Weinstein LLP are investigating and representing investors who were inappropriately recommended oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. One royalty trust that has suffered substantial declines is Baytex Energy Corp. (Stock Symbol: BTE). Over the past two years the trust has suffered a 93% loss in value.

Baytex Energy Corp. is an oil and gas company based out of Calgary, Alberta. The company’s business is engaged in the acquisition, development, and production of crude oil and natural gas in the Western Canadian Sedimentary Basin and in the Eagle Ford in the United States.

Our clients tell us similar stories that their advisors hyped oil and gas and commodities high yielding investments without significant discussion of risk. In a recent Associated Press article, common stories of how investors are pitched by their financial advisors on oil and gas investments were reported on. Often times these products are pitched as ways to ride the boom in U.S. oil and gas production and receive steady streams of income.

Hugoton Royalty Trust (HGT) Investor Loss Recovery

March 14, 2016 | by Staff Attorney

The investment attorneys with Gana Weinstein LLP are investigating and representing investors who were inappropriately recommended oil and gas and commodities related investments. Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in this speculative and volatile area. One royalty trust that has suffered substantial declines is Hugoton Royalty Trust (Stock Symbol: HGT). Over the past year the trust has suffered a 77% loss in value.

Hugoton Royalty Trust was created in 1998 when XTO Energy Inc. conveyed 80% net profits interests in gas-producing properties located in Kansas, Oklahoma and Wyoming to the trust. The trust was created to distribute monthly net profits related to the 80% net profits interests.

Oil and gas royalty trusts, like master limited partnerships (MLPs), invest in the energy and commodities sector. However, unlike MLPs, royalty trusts generate income from the actual production of natural resources such as coal, oil, and natural gas and therefore the cash flows from royalty trusts are subject to swings in commodity prices and production levels causing them to be very inconsistent. Royalty trusts have no physical operations, no management, and no employees. Instead, royalty trusts are merely financing vehicles run by banks that trade like stocks. Another company actually mine the resources and pay the royalties to the trust.