Securities Lawyers Blog

Former Morgan Stanley Broker Peter Doyle Barred by FINRA

December 3, 2017 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against former Morgan Stanley broker Peter Doyle (Doyle).

According to BrokerCheck records, Doyle was terminated from Morgan Stanley in June 2016 for failing to adhere to industry rules and/or firm policies including with regard to the use of trading discretion. Doyle’s failure to appear for FINRA requested on-the-record testimony in connection with its investigation into the conduct that led to his termination led to his bar from the industry. Without admitting or denying the findings, Doyle consented to the sanction and to the entry of findings that he refused to appear.

Before Doyle’s termination, Morgan Stanley was ordered by a FINRA arbitration panel to pay over $8 million in damages in a customer dispute concerning allegations that Doyle made unauthorized trades, failed to disclose fees, and engaged in the financial abuse of an elderly customer.

Summit Healthcare REIT Investment Loss Options

December 3, 2017 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating investor losses in Summit Healthcare REIT a non-traded real estate investment trust (Non-Traded REIT). According to the firm’s website, Summit Healthcare REIT is headquartered in Lake Forest, California and its objective is to provide investors with a diversified, income-producing portfolio of assets in the healthcare sector. Summit Healthcare acquires, leases, and manages healthcare real estate and invests in the healthcare sector and diversifies by property type, location, and tenant. Summit Healthcare REIT focuses on senior housing operators throughout the United States. The types of facilities the REIT works on are assisted living, memory care and skilled nursing facilities.

Recently, MacKenzie Realty Capital offered to purchase up to 330,000 shares of Summit Healthcare for only $1.34 per share – a significant loss on the original purchase price.

Our firm often handles cases involving direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments. These products are almost always unsuitable for middle class investors. In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments providing perverse incentives for brokers to sell high risk and low reward investments.

Clement Chichester and Brittney Sias Barred Over Claims of Receiving Customer Funds

November 30, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisors Clement Chichester (Chichester) and Brittney Sias (Sias), in October 2017, were terminated by their firm, Western International Securities, Inc. (Western International) based on allegations that they accepted a FINRA sanction. Chichester and Sias were barred from the industry by FINRA after FINRA requested documents and information and they failed to provide FINRA with the requested documents and information after initially providing partial responses to a previous request in connection with FINRA’s investigation of their alleged receipt of funds from a customer of the firm.

At this time it is unclear the extent and scope of Chichester’s and Sias’ private securities activities. Chichester CRD lists that he is engaged in insurance as an outside business activity. 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.

Investment Advisor Nadav Baum Subject to Fourteen Customer Complaints

November 30, 2017 | by Staff Attorney

The investment lawyers at Gana Weinstein LLP are investigating customer complaints against Pennsylvania Broker/Investment Advisor Nadav Baum (Baum). According to BrokerCheck records, Baum has been subject to fourteen customer complaints and two regulatory sanctions. The customer complaints allege that Baum engaged in securities law violations, including making unsuitable investments in client’s accounts.

In March 2017, the New Jersey Bureau of Securities sanctioned Baum after he allegedly failed to comply with the terms of a supervisory agreement. He was ordered to cease and desist and to pay a fine of $6,000.

In August 2009, the Financial Industry Regulatory Authority (FINRA) sanctioned Baum following allegations he executed discretionary trades without written authorization in the account of a deceased customer and executed discretionary trades in other accounts without authorization. He was issued a 30-day suspension and a fine of $15,000.

Patrick Maddren Subject to Customer Complaint For Excessive Trading

November 30, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) broker Patrick Maddren (Maddren) has been subject to two customer complaints and two tax liens. Maddren is currently registered with WestPark Capital, Inc. (WestPark Capital). In March 2016 a customer filed a complaint alleging a number of securities law violations including that the broker engaged in churning (excessive trading), material misrepresentations and omissions, unauthorized trading, unsuitable recommendations, and breach of contract among other claims. The claim alleged $1,000,000 in damages and is now settled.

In 2012 several tax liens were filed against Maddren in amounts totaling over $300,000. Large tax liens on a broker’s CRD can be a red flag that the broker may be influenced to engage in high commission activity in order to satisfy personal debts. In addition, a broker’s inability to manage their own finances is relevant in a customer’s decision to use their services.

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.

Aegis Capital Broker Paul Falcon Receives Customer Complaints over Unsuitable Trades

November 28, 2017 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating claims against Aegis Capital broker, Paul Falcon (Falcon). Falcon allegedly recommended unsuitable investments, executed unauthorized trades, made excessive transactions and recommended investments that performed properly.

According to BrokerCheck records, Falcon has received four customer complaints and one pending customer complaint.

In April 2017, a customer alleged Falcon recommended unsuitable investments, executed unauthorized trades, made excessive transactions and recommended investments that performed poorly. The customer is seeking $190,000 in damages and the complaint is still pending.

Alonza Barnett Barred By FINRA Over Failure to Respond to Requests for Information

November 28, 2017 | by Staff Attorney

According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Alonza Barnett (Barnett), in March 2017, was barred from the industry by FINRA after FINRA requested documents and information and he failed to request termination of his suspension within three months of the date of the Notice of Suspension drawing an automatic bar from association with any FINRA member in all capacities. Previously, Barnett was registered with Ameritas Investment Corp. (Ameritas).

In February 2017 a customer filed a complaint alleging that for a 15 year period Barnett engaged in conversion of funds, breach of fiduciary duty and constructive fraud, and violation of the North Carolina Investment Advisors Act. The claim appears to involve private securities. The claim alleged $1,750,000 in damages and is currently pending.

At this time it is unclear the extent and scope of Barnett private securities activities. Barnett CRD lists that he is engaged in fixed insurance products and operates a d/b/a called Dacthler Wealth Management as an outside business activity. 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”.

FINRA Bars former Wells Fargo Broker John Leonard

November 28, 2017 | by Staff Attorney

The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against John Leonard (Leonard), working out of Toledo, Ohio. Leonard allegedly failed to request termination of a previous suspension within three months resulting in an automatic bar from association with any FINRA member in all capacities.

According to BrokerCheck records, Leonard had been suspended from associating with any FINRA member in any capacity for allegedly failing to respond to a FINRA request for information. Leonard was barred by FINRA after he failed to request termination of this suspension.

Leonard has been named in five customer complaints and one that is still pending.

Hiring a FINRA Attorney

November 21, 2017 | by Staff Attorney

Are you hiring the a FINRA securities attorney to help you recover investment losses? This article will help you make the right choice when selecting a FINRA attorney by outlining the most important things to look out for. Consider these five questions to ensure you are hiring the best:

Is the attorney reputable?

It is imperative to hire a reputable attorney for FINRA arbitration who has the necessary educational background, training, and results-oriented experience. To ensure you are hiring the best securities attorney, look at the attorney’s practice areas, case experience, and client reviews.

The Department of Labor Fiduciary Rule May Impact Securities Arbitration Claims

November 21, 2017 | by Staff Attorney

The fiduciary rule passed during the Obama administration is being reviewed by the Department of Labor (DOL), leaving plenty of uncertainty for advisers and investors. As Barry Tempkin reports, “During this period, advisers who do not receive level-fee compensation are held to the DOL impartial conduct standard for retirement accounts, but are not required to enter into best interest contracts for commission-based compensation.” Under the DOL impartial conduct standard, brokers who offer retirement investing advice are required to put clients’ interests ahead of their own. Although portions of the rule went into effect in June, there are additional requirements but the DOL has proposed a delay to fully implementing the rule until July 2019.

We cannot be sure how the current DOL under Secretary Acosta will ultimately handle the adoption of a fiduciary standard. In the meantime, the impartial conduct standard for retirement accounts will likely result in more litigation and arbitration. Since the rule benefits investors, there will likely be a higher success rate for investors’ representatives.

Under the new fiduciary rule, if an adviser engages in a BIC (“Best Interests Contract”) agreement with a client, it allows the adviser to engage in transactions that are prohibited under the rule. If the “Best Interests Contract” (BIC) exception goes into effect, these claims will include breach of contract.