Securities Lawyers Blog

Jeanette Adcock Sanctioned by FINRA

December 21, 2017 | by Staff Attorney

According to BrokerCheck records kept by the Financial Industry Regulatory Authority (FINRA), broker Jeanette Adcock (Adcock) has been sanctioned for allegedly not complying with Illinois Securities Law.

Additionally, Adcock has been subject to three customer disputes in 2017. Moreover, In April 2017, Adcock was “permitted” to resign from Wayne Hummer Investments because she “failed to forward a written customer complaint to her supervisor or compliance department as required.”

In November 2017, a customer alleged that Adcock made misleading statements regarding a risky investment. The customer is requesting $25,000 in damages in this pending dispute.

Michael McTigue Terminated by ProEquities Over Multiple Rule Violations

December 21, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Michael McTigue (McTigue), in August 2017, was terminated by his employer ProEquities after the firm alleged that during a recent branch inspection of the firm discovered issues relating to (1) use of unapproved email address; (2) use of unapproved performance report; (3) customer signature discrepancies on firm paperwork; (4) frequent trading of mutual fund A shares; (5) breakpoint sales of mutual funds; (6) unapproved marketing materials; (7) undisclosed outside business activities (OBA); and (8) text messaging a customer. When the firm presented these issues to McTigue and requested an explanation he resigned prior to submitting explanation to all of the issues.

At this time it is unclear the extent and scope of McTigue’s securities violations and outside business activities. McTigue’s CRD lists that he operates a d/b/a called South Coast Financial as an outside business activity. In addition, McTigue lists Realty South as a real estate business. While at this time it is unknown if McTigue used these businesses and unapproved communications methods to sell investments, 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 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.

Benefit Street Partners Realty Trust REIT Investment Loss Options

December 21, 2017 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating investor losses in Benefit Street Partners Realty Trust (Benefit Street) a non-traded real estate investment trust (Non-Traded REIT). Benefit Street was formerly known as Realty Finance Trust. However, in September 2016 Realty Finance Trust appointed Benefit Street as its new advisor replacing AR Global Investments.

According to the firm’s website, Benefit Street originates, acquires, and manages a diversified portfolio of commercial real estate debt secured by properties located in the United States. The funds manager is a leading credit-focused alternative asset management firm with over $20 billion of assets under management. The manager claims it has an experienced real estate team and lends against all commercial property types across the United States. The REIT invests throughout the capital structure with a focus on generating attractive risk-adjusted returns.

However, according to secondary market sources for non-traded REITs, shares of Benefit Street are currently listed for $12.99 per share a far drop from the sale price of $25 per share.

Ahmed Gheith Terminated by Paulson Investment Over Sale of Promissory Note

December 18, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Ahmed Gheith (Gheith), in August 2017, was terminated by his employer Paulson Investment Company, LLC (Paulson Investment) after the firm alleged that Gheith was terminated subsequent to discovery of violations of firm supervisory procedures, failure to provide honest answers on annual questionnaires, violations of FINRA Rule 3280, and due to initiation of customer arbitration alleging fraud, negligence, and unjust enrichment. The firm referenced that the product involved was a promissory note. Thereafter, in April 2018 FINRA Suspended Gheith.

FINRA alleged that two registered representatives informed Gheith about a private offering related to a real estate development in Belize. The investment was described as a short-term note meant to raise money for the development of an airport and Gheith thereafter referred several customers to invest. FINRA found that Gheith’s communications with four customers included a description of the Private Offering and leading the customers to invest a total of $3.5 million in the offering. FINRA alleged that Gheith was paid $93,165 for his role in soliciting and referring the customer.

FINRA’s allegations concerning promissory notes, a private securities transaction, –is known in the industry as “selling away”.

Masood Azad Barred by FINRA Over Securities Sales Practices

December 18, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Masood Azad (Azad), in May 2017, was terminated by his employer First Allied Securities, Inc. (Frist Allied) after the firm alleged that Azad violated firm policy relating to borrowing money from clients, engaging in an unapproved private securities transaction and outside business activity. Thereafter, FINRA opened an investigation and ultimately barred Azad from the industry. FINRA found that Azad failed to provide FINRA requested documents and information in connection with its investigation into allegations of misconduct by Azad. FINRA stated that the allegations included that Azad participated in an unapproved private securities transaction by soliciting investments and/or directly investing in an electronic data security company and engaged in outside business activities involving the company without obtaining authorization from the firm.

At this time it is unclear the extent and scope of Azad’s securities violations and outside business activites. Azad’s CRD lists that he is also an attorney and operates the Law Offices of M.H. Azad. Azad also lists an insurance business called Consolidated Working Group and operates a d/b/a for his securities business called Robertson Wealth Management. Finally, Azad lists American Retirement Solutions as another securities related d/b/a outside business activity. While at this time it is unknown the exact products and services sold away any selling of notes or other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.

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.

William Paynter Alleged to Have Recommended Unsuitable Oil & Gas Investments

December 18, 2017 | by Staff Attorney

According to BrokerCheck records financial advisor William Paynter (Paynter), employed by Wells Fargo Clearing Services, LLC (Wells Fargo), has been subject to two customer complaints. According to records kept by The Financial Industry Regulatory Authority (FINRA) Paynter has been accused by a customers of unsuitable investment advice concerning various investment products including energy stocks that likely include master limited partnerships (MLPs). The law offices of Gana Weinstein LLP continue to report on investor related losses and potential legal remedies due to recommendations to investor in oil and gas and commodities related investments.

The most recent claim was filed in June 2017 and alleges that Paynter made unsuitable investments from 2013 through 2014. The customer alleges $500,000 in damages and the claim is currently pending.

In May 2017 another customer alleged that Paynter from 2010 through 2017 made unsuitable investments and over concentration in oil and energy investments. The claim alleges the broker committed negligence, breach of fiduciary duty, negligent supervision, and breach of contract causing $500,000 in damages. The claim is currently pending.

Advisor Jerry Guttman Barred For Investing $7,000,000 of Client Funds in Private Companies

December 17, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Jerry Guttman (Guttman), operating under the d/b/a Guttman Financial Group, in November 2017, was barred from the financial industry by FINRA concerning allegations that he sold more than $7,000,000 worth of membership interests in at least six different limited liability companies to 38 customers without proper disclosure. FINRA found that Guttman participated in the sales of these membership interests by soliciting the membership interests to investors; communicating with investors about their investments; drafting, distributing, and collecting the investment agreements; collecting and depositing investors’ checks into the companies’ bank accounts; and managing the companies as one of only two managing members.

Guttman’s employer, United Planners Financial Services of America (United Planners) discharged Guttman in September 2017 alleging that Guttman offered unapproved investments.

At this time it is unclear the extent and scope of Guttman’s securities violations and outside business activites. However, Guttman’s CRD lists a number of outside business activities and companies that may be vechiles for his fundraising activities. Guttman is involved with Walled Lake Properties – a condo rental property, Serenity Management, LLC – a cemetery business, Leasing USA – commercial property rental company, Sofa Society for Financial Awareness as a consultant, Nationwide Planning & Benefits (NPB Solutions) – the marketing and sale of insurance products, Leasing USA II – a commercial property rental company, Champion Entertainment Group, LLC – a company that records TV songs, 92^nd Street Holdings – a commercial property rental company, and Total Living Plan, LLC – estate planning company.

Joseph Cotter Sanctioned Over High Commissions and Excessive Trading

December 13, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Joseph Cotter (Cotter) has been subject to two customer complaints, two employment terminations for cause, and one regulatory action. Cotter was formerly registered with Next Financial Group, Inc. (Next Financial). In March 2016 Next Financial terminated Cotter claiming that the firm conducted an internal review of the trading activity in a customer’s accounts and found the level of trading activity to be excessive (excessive trading) in light of the customer’s profile and the character of the account.

Thereafter, FINRA investigated Cotter and found that Cotter engaged in excessive, unsuitable trading in the accounts of one customer. FINRA found that Cotter exercised de facto control over an IRA account and a second account of a customer. FINRA determined that Cotter used this control to excessively trade the accounts in a manner that was inconsistent with the customer’s investment objectives, financial situation, and needs. The trading generated commissions of $100,549 while the client lost $391,893.

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.

SEC Accuses Payson Petroleum 3 Well 2014 Owners Of Fraud

December 10, 2017 | by Staff Attorney

The Securities and Exchange Commission (SEC) filed a civil action charging Matthew Griffin and William Griffin with fraudulently offering two Texas oil and gas partnerships – Payson Petroleum 3 Well 2014. The SEC alleges that between November 2013 and July 2014 the Griffins conducted a fraudulent offering of interests raising $23 million from approximately 150 investors for the purpose of developing three oil and gas wells. The SEC claims that the Griffins misled investors about Payson’s promised participation in the program and other aspects of Payson’s compensation as the program’s sponsor and operator.

According to the SEC, the Griffins authorized offering materials containing numerous misrepresentations and omissions including: i) that Payson would contribute an up-front 20% of the offering amount in the amount of $5.4 million and that this capital infusion would cover 20% of the cost of the wells; ii) that Payson’s consideration as program sponsor/operator/co-investor would be limited to 20% of any petroleum revenue generated by the wells; and iii) that Payson would cover any cost overages beyond the estimated $24 million.

The SEC found these representations to be false because Payson contributed no money to the offering and paid nothing toward the well costs and moreover Payson lacked the financial means to pay even the smallest cost overage. The program later declared bankruptcy.

William Heiden Accused of Concentrating Customers in Oil & Gas Investments

December 10, 2017 | by Staff Attorney

According to BrokerCheck records financial advisor William Heiden (Heiden), employed by Wedbush Securities Inc. (Wedbush), has been subject to nine customer complaints. According to records kept by The Financial Industry Regulatory Authority (FINRA) Heiden has been accused by a customers of unsuitable investment advice concerning various investment products including energy stocks including master limited partnerships (MLPs). The law offices of Gana Weinstein LLP continue to report on investor related losses and potential legal remedies due to recommendations to investor in oil and gas and commodities related investments.

The most recent claim was filed in June 2017 and alleges that Heiden, breach his fiduciary duty, committed violation of industry rules, and financial elder abuse causing $855,299. The customer’s accounts were maintained at the firm from September 2013 to April 2017. The claim is currently pending. The broker has stated in defense of the claim that market conditions and the collapse of oil prices in 2014 and 2015, resulted in a loss of value of some stock and bond positions in the customer’s account.

In January 2017 a customer alleged that Heiden, that from March 2012 to February 2016, made unsuitable investments in the client accounts causing $950,718 in damages. The claim is currently pending.