Articles Posted in Suitability

shutterstock_73854277-300x200Broker, John Marshall, currently employed at Centaurus Financial. Inc., (Centaurus) has been subject to at least two customer complaints during the course of his career. Both complaints allege Marshall of making unsuitable trading recommendations.

According to a BrokerCheck report, in September 2019, a customer alleged that from 2004 through 2019 misrepresented unsuitable investments and breached his fiduciary duty. The matter settled for $55,000. Moreover, in December 2018, another customer alleged that Marshall recommended unsuitable investments throughout the period of November 2012 through August 2018.  The matter is still pending and the customer is seeking damages in the amount of approximately $336.000.

Brokers have an obligation to make only suitable recommendations for investments to the client.  There are many investments that are not appropriate for the majority of investors or for certain investors given their risk tolerance, age, and other factors.  Brokers should not present these investment options to clients.  There are two screens that brokers must employ to determine whether an investment is suitable for a client.  First, there must be a reasonable basis for the recommendation – meaning that the product has been investigated and due diligence conducted into the investment’s features, benefits, risks, and other relevant factors.  The broker must conclude that the investment is suitable for at least some investors and some securities may be suitable for no one.  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_132317306-300x200Advisor Roy Williams (Williams), currently employed by brokerage firm Center Street Securities, Inc. (Center Street Securities) but doing business as Williams Financial Group has been subject to at least seven customer complaints and one regulatory action during the course of his career.  According to a BrokerCheck report the most recent customer complaints since 2017 concern alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements.  The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.

In May 2020a customer complained that Williams violated the securities laws by alleging that Williams made unsuitable investments and failed to conduct due diligence on the investments made. The claim involves alternative investments, alleges $100,000 damages, and is currently pending.

DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments.  These alternative investments virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure.  Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments.

Several studies have confirmed that Non-traded REITs underperform publicly traded REITs with some showing that Non-Traded REITs cannot even beat safe benchmarks, like U.S. treasury bonds.  Brokers selling these products must disclose to the investor that non-traded REITs provide lower investment returns than treasuries while being high risk and illiquid – but almost never do.  Because investors are not compensated with additional return in exchange for higher risk and illiquidity, these kinds of alternative investment products are rarely, if ever, appropriate for investors.  Continue Reading

Joseph Andreoli Jr is a Financial advisor. A graduate of Ramapo College of New Jersey, Mr. Andreoli Jr holds a Bachelor of Science in business. In 1987 he started his professional career at Hym Financial, INC for a year and proceeded further on his path to work for many firms such as J.B. Hanaur & Company, Smith Barney Inc., Citigroup Global Markets Inc., Wells Fargo Clearing Services LLC and is currently working for Raymond James & Associates, Inc. Mr. Andreoli was in the securities industry for approximately 33 years.

A brokerage firm or broker-dealer is in the business of buying and selling securities- stocks, bonds, mutual funds and certain other investment products on behalf of its customer for its own bank. An investment adviser is paid for providing advice about securities to clients. In addition, some investment advisers manage investment portfolios and offer financial planning services. Mr. Andreoli Jr is licensed to sell securities in 17 states.

In or around July of 2000, Mr. Andreoli Jr had his first dispute, the allegations against him consisted of the unsuitable sale of securities, negligence, breach of contract, breach of fiduciary duties, fraud, violation of industry rules, federal securities laws, and various Texas state law statutes regarding trading of treasury bonds on margin for capital gains for a requested amount of $196,275.88. The unsuitable sale of securities occurs when a broker fails to take into account customer specific information in making a recommendation. Negligence is the failure to take proper care or carelessness. Breach of contract is the breaking of legal agreement. A breach of fiduciary duty occurs when the fiduciary acts in the interest of themselves, rather than the best returns for the client. Fraud is an intentional act to deceive for personal gain. At the conclusion of the case, the Claimant in this matter was awarded $56,555 by an arbitration panel.

shutterstock_187083428-300x198The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor Shane Appelbaum (Appelbaum), currently employed by Herbet J. Sims & Co, Inc. (Herbert J. Sims) has been subject to at least two customer complaints and one criminal matter during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), one of Appelbaum’s customer complaints likely involves the sale of structured products.  The complaint alleges that Appelbaum recommended unsuitable investments in what are referred to as CDs issued by several banks.

In February 2020 a customer complained that Appelbaum violated the securities laws by alleging that Appelbaum made unsuitable sales of $75,000 in a Bank of America CD purchased in Oct. 2014, maturing 2030 and a $240,000 Citibank CD purchased in Jan. 2014, maturing 2034 purchased for the partnership which is beneficially owned by an elderly husband and wife.  The claim alleges $86,864.90 and is currently pending.

In June 2018 a customer complained that Appelbaum violated the securities laws by alleging that Appelbaum’s investment recommendations involved unsuitable trades, negligence, fraud, and misrepresentation. The claim was settled for $40,000.

Structured products range in risk from benign to extreme.  However, most structured products produce inferior risk/return profiles than ordinary debt or equity instruments because the brokerage firms that issue these products seek to profit from the spread between the payment to investors and the amount of money the brokerage firm can make from the issuance.  When dealing with some of the more complex structured products most investors will lack the ability to understand the merits of investments nor are many structured products appropriate for investors seeking a fixed or reliable income and preservation of capital.

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shutterstock_62862913-259x300The investment attorneys with Gana Weinstein LLP are investigating investors who were inappropriately recommended the Allianz Structured Alpha 1000 and Structured Alpha 1000 Plus Funds.  Investors may have potential legal remedies due to unsuitable recommendations by their broker to invest in these speculative and volatile investment offerings.  Allianz Global Investors told investors that they are liquidating the two hedge funds after they took heavy losses due to COVID related stock volatility on the portfolios stock-options trades.

The Structured Alpha 1000 and Structured Alpha 1000 Plus apparently had been net buyers of puts, or options giving the holder the right to sell an asset at a predetermined price in the future. These put investments were designed to hedge against losses the funds might endure in a market downturn.  However, the strategy did not work and as the market continued declining the funds were forced to lock in losses.

The 1000 in the Structured Alpha Fund names refers to their return targets: 1,000 basis points, or 10 percentage points, above their benchmarks.  However, the Funds advertised themselves as relatively safe and stable investments that were specifically designed to perform well during market downturns.

The Funds’ three-pronged investment objective is to (1) profit during normal market conditions; (2) protect against a market crash, hedging against extreme downside market moves; and (3) navigate as wide a range of equity market outcomes as possible.  In fact the fund advertised that volatile markets would be beneficial to the strategy and that the higher volatility levels would enable increased outperformance potential and better risk control.  The Funds claimed that a protracted bear market is a highly favorable environment for the strategy.

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shutterstock_1081038-300x200Advisor Lee Kramer (Kramer), currently employed by FSC Securities Corporation (FSC Securities), has been subject to at least two customer complaints, seven regulatory actions, and two employment terminations for cause during the course of his career.  According to a BrokerCheck report one of the customer complaints concern alternative investments such as direct participation products (DPPs) like business development companies (BDCs), non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and private placements.  Kramer discloses that he operates a number of outside businesses, some of which are investment related, including Kramer Financial, LLC and Kramer Wealth Managers.  The attorneys at Gana Weinstein LLP have represented hundreds of investors who suffered losses caused by these types of high risk, low reward products.

In October 2019 a customer complained that Kramer violated the securities laws by alleging that Kramer engaged in sales practice violations related to recommending alternative investments such as BDCs and an annuity.  The claim alleges $93,000 and is currently pending.

DDPs include products such as non-traded REITs, oil and gas offerings, equipment leasing products, and other alternative investments.  These alternative investments virtually never profit investors and are almost always unsuitable for investors because of their high fee and cost structure.  Brokers selling these products are paid additional commission in order to hype these inferior quality investments providing a perverse incentives to create an artificial market for the investments.

Several studies have confirmed that Non-traded REITs underperform publicly traded REITs with some showing that Non-Traded REITs cannot even beat safe benchmarks, like U.S. treasury bonds.  Brokers selling these products must disclose to the investor that non-traded REITs provide lower investment returns than treasuries while being high risk and illiquid – but almost never do.  Because investors are not compensated with additional return in exchange for higher risk and illiquidity, these kinds of alternative investment products are rarely, if ever, appropriate for investors.  Continue Reading

shutterstock_132704474-300x200According to BrokerCheck records financial advisor Charles Evan (Evan), formerly employed by MML Investors Services, LLC (MML Investors) has been subject to five customer complaints, one regulatory action, and one employment termination for cause during his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), many of the customer complaints against Walker concern allegations over various annuities, insurance, and variable annuity sales practices.

In October 2019 MML Investors terminated Evan alleging inappropriate traditional insurance sales practices.  Thereafter, FINRA investigated Evan, and in January 2020, FINRA found that Evan consented to the sanction and findings that he refused to provide documents and information requested by FINRA in connection with allegations concerning inappropriate traditional insurance sales practices.

In March 2020 a client complained that Evan violated the securities laws alleging that after meeting with Evan in 2017, he sold her several variable annuities that were found to be unsuitable for her needs. The customer alleged $157,370 in damages.  The claim is currently pending.

In February 2020 a client complained that Evan violated the securities laws alleging that beginning in 2008, Evan made misrepresentations, and provided bad investment advice on the sales of various products, which resulted in a financial loss.  The claim is currently pending.

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shutterstock_27597505-300x200The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor Dennis Nakamura (Nakamura), formerly employed by McNally Financial Services Corporation (McNally Financial) has been subject to at least five customer complaints and one regulatory action during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Nakamura’s customer complaints allege that Nakamura recommended unsuitable investments among other allegations of misconduct relating to the handling of their accounts.

In November 2019 FINRA barred Nakamura after finding that Nakamura consented to the sanction and findings that he refused to appear and provide on-the-record testimony requested by FINRA in connection to its investigation into whether he violated FINRA rules by making unsuitable investment recommendations to customers.

In July 2018 a customer complained that Nakamura violated the securities laws by alleging that Nakamura engaged in sales practice violations related to failure to disclose extent of risk, unauthorized trading, recommending unsuitable investments, breach of fiduciary duty, failure to supervise, churning, breach of contract and elder abuse. The claim alleged $491,861 in damages and settled for $300,000.

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shutterstock_85873471-300x200The securities lawyers of Gana Weinstein LLP represent investors that were sold NorthStar Healthcare Income Inc., (NorthStar Healthcare) – a non-traded real estate investment trust (non-traded REIT).  Our representations focuses on the failure of the investor’s brokerage firms to conduct adqueate due diligence on NorthStar Healthcare pior to recommending the investment for their client in addition to other suitability violations of the securities laws.  Our firm continues to be contacted on nearly a daily basis concerning their investment in this product.

NorthStar Healthcare continues to report that it is not profitable.  NorthStar Healthcare has reported massive investor losses on investor capital raised and currently trades at only 25 cents for every dollar purchased on the secondary markets.  On November 29, 2019 investors received a letter from Comrit Investment 1, LP (Comrit) offering investors the opportunity to sell the REIT for only $2.86 a share – again reflecting the dire state of affairs for NorthStar Healthcare.  According to the September 2019 financial data Northstar raised over $1.7 billion from investors and has accumulated losses of $1 billion of it leaving a net equity of less than $700 million.  In fact, in the last 9 months since the end of 2018 Northstar reports that investor equity declined another 7% while it has not paid investors any distributions.

As investors are aware, NorthStar Healthcare no longer distributes a dividend.  Further, a review of NorthStar Healthcare’s dividend history reveals that most distributions received were merely fraudulent returns of investor capital and not profits on investments.  Indeed, not one penny returned to investors since 2015 was from the REIT’s profits.  NorthStar Healthcare’s continuing return of capital to investors since 2015 served only to allow the company to raise more investor money and make it appear to investors as if the company was a profitable enterprise when it never was.

According to the NorthStar Healthcare’s website, the investment formed to originate, acquire and asset manage equity and debt investments in healthcare real estate. NorthStar Healthcare claims that it is focused on making investments in the needs-driven senior housing sector including independent living facilities, assisted living, memory care, and skilled nursing facilities.  NorthStar Healthcare launched in February 2013 and raised total gross proceeds of $2 billion, including $225.3 million through its distribution reinvestment plan.  The company claims to have a $2.4 billion portfolio of 633 properties as of the June 2019.

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shutterstock_177792281-300x198The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor Charles Kerker (Kerker), formerly employed by Next Financial Group, Inc. (Next Financial) was has been subject to at least one customer complaint and one employment termination for cause during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Westenbarger’s customer complaint alleges that Kerker recommended unsuitable investments among other allegations of misconduct relating to the handling of their accounts.

In June 2019 Kerker’s employer, Next Financial, discharged Kerker alleging failure to adequately respond to a compliance inquiry regarding equity transactions in 12 customer accounts. Specifically, the date and time that clients were contacted regarding each transaction, the rationale for the transactions, the suitability analysis conducted for each customer and copies of investment research.

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