Securities Lawyers Blog

Broker Investigation: Network 1 Financial Securities Advisor David Lerner

November 22, 2016 | by Staff Attorney

Investment attorneys at Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against David Lerner (Lerner) currently associated with Network 1 Financial Securities Inc. (Network 1) alleging unsuitable investments and failure to follow instructions among other claims. According to brokercheck records Lerner has been subject to 10 customer complaints, one regulatory sanction, one employment separation for cause, and three judgments/liens.

In July 2015, Lerner received a tax lien in the amount of $16,388. Earlier in April 2015 Lerner was subject to another tax lien of $81,986. 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 in the financial industry have the fundamental responsibility to treat investors fairly. This obligation includes making only suitable investments for their client. The suitable analysis has certain requirements that must be met before the recommendation is made. First, there must be reasonable basis for the recommendation for the investment based upon the broker’s and the firm’s investigation and due diligence. Common due diligence looks into the investment’s properties including its benefits, risks, tax consequences, the issuer, the likelihood of success or failure of the investment, and other relevant factors. Second, if there is a reasonable basis to recommend the product to investors the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives. These factors include the client’s age, investment experience, retirement status, long or short term goals, tax status, or any other relevant factor.

Financial Advisor Joseph Thurnherr Subject to Multiple Customer Complaints

November 21, 2016 | by Staff Attorney

Investment attorneys at Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Joseph Thurnherr (Thurnherr) alleging unsuitable investments, fraud, churning, breach of fiduciary duty, and unauthorized trading among other claims. According to brokercheck records Thurnherr has been subject to five customer complaints, and one judgment/lien.

In November 2014, Thurnherr received a tax lien in the amount of $27,663. 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.

In June 2016 a customer filed a complaint alleging that Thurnherr overconcentrated their account causing $93,624 in losses. The claim is currently pending.

SEC Charges Peter Kohli With Fraud in the Sale of DMS Funds

November 20, 2016 | by Staff Attorney

Our firm is investigating claims made by Securities and Exchange Commission (SEC) against broker Peter Kohli (Kohli), DMS Advisors, Inc. (DMS Advisors), and Marshad Capital Group, Inc. (Marshal). See SEC v. Peter R. Kohli, et al, (E.D. Pa.). According to the SEC, from 2012 through 2015 Kohli lied to induce over 120 investors to invest at least $3.2 million in entities owned or controlled by Kohli. Kohli was a registered representative of Trustmont Financial Group, Inc. (Trustmont) from July 2010 until May 2015 out of the firm’s Leesport, Pennsylvania office location. In April 2015 Trustmont permitted Kohli to resign for accepting loans from a client.

The SEC allged that Kohli launched the DMS Funds that consisted of four emerging markets mutual fund series. Kohli allegedly solicited his own customers and clients to invest in the funds using prospectuses and other documents that contained misrepresentations overstating DMS Funds’ sophistication and ignored key risks associated with the investments. The SEC alleged that as the fund collapsed due to Kohli’s recklessness, Kohli engaged in three other frauds in an effort to keep the funds afloat. One such alleged fraud was that Kohli made material misrepresentations in connection with the sale of warrants 10 purchase Marshad stock – an entity Kohli controlled. In addition, the SEC accused Kohli of misappropriating investor money that he solicited for the purported purpose of making investments into one of the finds and instead used the money to pay fund expenses. Finally, the SEC accused Kohli of lieing to investozs in connection with the sale of Marshad promissory notes in a desperate attempt to raise money to cover fund expenses and delay the DMS Funds’ collapse.

According to Kohli’s brokercheck records Kohli was permitted by Trustmont to engage in DMS Financial, Inc. and DMS Funds. 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”.

Broker John Cangialosi Sanctioned by Multiple Regulators

November 18, 2016 | by Staff Attorney

Investment attorneys at Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against John Cangialosi (Cangialosi) alleging unsuitable investments, fraudulent and negligent acts, breach of contractual requirements, churning, and negligent misrepresentation among other claims. According to brokercheck records Cangialosi has been subject to five customer complaints, two financial disclosure – one bankruptcy and one tax liens, one employment separation for cause, and two regulatory events.

In April 2013, FINRA found that Cangialosi violated FINRA rules that require the timely disclosure judgments or liens. In this case FINRA found that Cangialosi failed to timely disclose six liens and fined him $5,000 and suspended Cangialosi for three months. In January 2016 the state of Michigan denied Cangialosi’s application to engage in securities business in the state on the grounds that Cangialosi engaged in dishonest and unethical practices within the last 10 years supporting the denial of his registration application.

In 2009 J.P. Turner & Company, LLC permitted Cangialosi to resign after allegations were made that the broker engaged in unauthorized trading in a client’s account.

Broker Investigation: Customer Complaints Against Advisor Christian Herrera

November 18, 2016 | by Staff Attorney

Attorneys at Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Christian Herrera (Herrera) alleging unsuitable investments and unauthorized trading among other claims. According to brokercheck records Herrera has been subject to five customer complaints, one financial disclosure – a bankruptcy, and one regulatory event.

A customer filed a complaint in October 2013 alleging that the broker made unsuitable recommendations by over-concentrating their leading to $39,229 in losses. The claim was settled for $14,000.

Brokers in the financial industry have the fundamental responsibility to treat investors fairly. This obligation includes making only suitable investments for their client. The suitable analysis has certain requirements that must be met before the recommendation is made. First, there must be reasonable basis for the recommendation for the investment based upon the broker’s and the firm’s investigation and due diligence. Common due diligence looks into the investment’s properties including its benefits, risks, tax consequences, the issuer, the likelihood of success or failure of the investment, and other relevant factors. Second, if there is a reasonable basis to recommend the product to investors the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives. These factors include the client’s age, investment experience, retirement status, long or short term goals, tax status, or any other relevant factor.

Brokerage Firms Sanctioned $6.2 Million Over Sale of L-Share Variable Annuities

November 15, 2016 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) announced that it has fined eight brokerage a total of $6.2 million for failing to supervise sales of variable annuities (VAs). Five of the firms were required to pay more than $6 million to customers who purchased L-share variable annuities that came with potentially incompatible, complex and expensive long-term minimum-income and withdrawal riders.

FINRA’s enforcement actions were against the following firms.

VOYA Financial Advisors Inc. – fined $2.75 million.

FINRA Sanctions Financial Advisor Michael Barranco Over Private Securities Transactions

November 15, 2016 | by Staff Attorney

Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) against broker Michael Barranco (Barranco). According to BrokerCheck records Barranco is subject to one regulator complaint, one employment separation for cause, and one financial disclosure. The FINRA regulatory matter concerns an investigation surrounding alleged sales of private securities transactions. (FINRA No. 2015048273301).

According to FINRA, between 2010 and 2015, Barranco was involved in almost 40 private securities transactions with three different issuers. In 2010, Barranco requested and received permission from LPL to act as a consultant and provide business planning advice to an entity (TMG) founded by two of his customers. FINRA found that Barranco also participated in the solicitation of investments by firm customers and others in 13% Senior Notes issued by TMG,

FINRA found that between November 2010 and February 2011, Barranco participated in 35 transactions through which 27 individuals invested at least $2,087,000 in the TMG notes. In addition, FINRA also found that in 2014, the founders of TMG purchased a distressed real estate development (IBH) and issued 12% Senior Notes which Barranco recommended to two of his customers who invested $750,000. 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”.

Raymond James and Broker Joel Burstein Accused of Aiding $350 Million Fraud

November 12, 2016 | by Staff Attorney

Records kept by The Financial Industry Regulatory Authority’s (FINRA) concerning broker Joel Burstein Jr. (Burstein) reveal ten recently filed customer complaints. The customer complaints against Burstein involve claims of common law fraud, negligence, violation of Florida Statute 726 (fraudulent transfers), aiding and abetting, unsuitable recommendations, and breach of fiduciary duty among other claims. These claims allege hundreds of millions in investor losses.

The claims appear to be related to actions taken by the Securities and Exchange Commission (SEC) in a fraud complaint against Ariel Quiros and William Stenger alleging that they and their companies made false statements and omitted key information while raising more than $350 million from investors to construct ski resort facilities and a biomedical research facility in Vermont.

Raymond James was then named in a lawsuit filed by the SEC-appointed receiver. According to news sources, investors were told they were investing projects connected to Jay Peak Inc. ski resort operated by Mr. Quiros and Mr. Stenger. While investor money was supposed to be used for to finance specific projects the operators, in Ponzi scheme fashion, used money from investors in later projects to fund deficits in earlier projects.

Mark Wesley Terminated by Ameriprise After Unauthorized Trading in Customer Accounts

November 9, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Mark Wesley (Wesley) alleging unsuitable investments, negligence, and breach of fiduciary duty among other claims. According to brokercheck records Wesley has been subject to six customer complaints. Some of the complaints involve direct participation products (DPPs), oil and gas private placements, variable annuities, non-traded real estate investment trusts (REITs), and other alternative investments.

In June 2016, Ameriprise Financial Services, Inc. (Ameriprise) permitted Wesley to resign alleging that he was under suspension for compliance policy violations related to unauthorized trading, use of discretion in a non-discretionary account, supervision of staff and responding to supervision.

In addition, Wesley has been subject to five tax liens totaling millions of dollars. 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.

Leonard Fox Barred Over Borrowing Customer Funds

October 31, 2016 | by Staff Attorney

The investment fraud lawyers of Gana Weinstein LLP are investigating the regulatory complaint filed by The Financial Industry Regulatory Authority (FINRA) involving former FSC Securities Corporation (FSC) broker Leonard Fox (Fox) out of the firm’s Marlton, New Jersey office. According to BrokerCheck records Fox has been subject to four customer complaints and two regulatory actions.

In August 2016, FINRA brought a regulatory action and barred Fox from the industry. (FINRA No. 2016050482101). FINRA alleged that Fox consented to the sanctions and findings that he failed to respond to FINRA’s requests for documents and information related to an investigation into allegations that he had borrowed and misappropriated funds from a firm customer. This was not the first time FINRA accused Fox of borrowing customer funds. In May 2012, FINRA brought a separate action against Fox alleging that Fox borrowed $10,000 from a client and suspended him for 10 days. 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”.

At this time it is unclear the nature and scope of Fox private securities transactions. However, according to brokercheck records, Fox has disclosed OBAs listed as including Fox Wealth Management Group, LLC. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate brokers, or insurance agents to clients of those side practices.