Securities Lawyers Blog

Gana LLP Now Representing Investors That Suffered Losses in Quicksilver Resources

May 18, 2015 | by Staff Attorney

The law offices of Gana Weinstein LLP are currently representing investors who have suffered losses in in now bankrupt oil and gas company Quicksilver Resources, Inc. (Quicksliver) (Stock Symbols: KWKAQ, KWKA, and KWK). Quicksilver is an independent oil and gas company engaged in the acquisition, exploration, development, production, and sale of natural gas, natural gas liquids, and oil in North America headquartered in Fort Worth, Texas. Quicksilver filed for chapter 11 bankruptcy on March 14, 2015.

Our offices continue to report on investment losses suffered by investors in various oil and gas investments that brokerage firms have increasingly recommended to retail investors in recent years. These investments include private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and even individual stocks. See Overconcentrated in Oil and Gas Investments?, MLP Fund MainStay Cushing Royalty Energy Hurt by Failing Oil & Gas Prices; Oil and Gas Investments – Issuers Profit While Investors Take All the Risk, BlackGold Opportunity Fund Investors Suffer Losses

Oil and gas related investments have been recommended by brokers under the assumption that oil & gas would continue to be sold at around $100 and increase steadily over time. However, last summer the price of oil & gas plummeted due to a strengthening dollar and increased global supply of oil and remains below $60 to this day. Some experts are saying that if production volume continues to be as high as it currently is and demand growth weak that the return to $100 a barrel is years away.

Broker John Miller Suspended By FINRA Over Unauthorized Trading

May 18, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) fined and suspended broker John Miller (Miller) concerning allegations between October 2010, and January 2014, Miller executed discretionary transactions in approximately 90 accounts of customers under a verbal authorization but without prior written authorization from those customers or approval of his brokerage firm City Securities Corporation (City Securities).

Miller became a broker with a FINRA firm in 1997. From November 2009 until October 2010, Miller was associated with PNC Investments. Since October 2010, Miller has been registered with City Securities.

FINRA alleged that Miller exercised discretion in executing transactions in the accounts of approximately 90 customers. FINRA found that Miller received prior verbal authorization from his customers for these transactions for their investment strategies but exercised discretion in executing those transactions. FINRA determined that Miller did not obtain written authorization from his customers and that City Securities did not approve these accounts for discretionary trading.

Has Your Financial Advisor Overconcentrated Your Investments In Oil & Gas?

May 14, 2015 | by Staff Attorney

Long time readers of this blog know that we have previously reported that brokerage firms have increasingly recommended that retail investors invest heavily in various types of oil & gas investments including private placements, master limited partnerships (MLPs), leveraged ETFs, mutual funds, and even individual stocks. See Overconcentrated in Oil and Gas Investments?, MLP Fund MainStay Cushing Royalty Energy Hurt by Failing Oil & Gas Prices; Oil and Gas Investments – Issuers Profit While Investors Take All the Risk

For instance, MLPs are publicly traded partnerships where about 86% of approximately 130 MLP securities, a $490 billion sector, can be attributed to energy and natural resource companies. Billions more have been raised in the private placement market. These oil and gas private placements suffer from enormous risks that often outweigh any potential benefits including securities fraud, conflicts of interests, high transaction / sales costs, and investment risk.

These investments have been recommended by brokers under the assumption that oil & gas would continue to be sold at around $100 and increase steadily over time. However, last summer the price of oil & gas plummeted due to a strengthening dollar and increased global supply of oil and remains below $60 to this day. Some experts are saying that if production volume continues to be as high as it currently is and demand growth weak that the return to $100 a barrel is years away.

Why the Investing Public Falsely Believes Advisors Are Fiduciaries

May 13, 2015 | by Staff Attorney

The investor advocacy bar association PIABA (the Public Investors Arbitration Bar Association) has recently issued a report called “Major Investor Losses Due to Conflicted Advice: Brokerage Industry Advertising Creates the Illusion of Fiduciary Duty.” The PIABA report argues that the brokerage industry uses false advertising to convey to investors that the firms have a fiduciary duty to their clients only then to do a 180 turn when sued to claim that no such duty exists.

According to the report, some of the largest firms in the United States are falsely advertise in this fashion including Merrill Lynch, Wells Fargo, Morgan Stanley, UBS, Fidelity, Ameriprise, Allstate Financial, Berthel Fisher, and Charles Schwab. The report claimed that all of these firms “advertise in a fashion that is designed to lull investors into the belief that they are being offered the services of a fiduciary.”

In the wake of the financial crisis of 2008, the Dodd-Frank legislation authorized the Securities Exchange Commission (SEC) to pass a fiduciary duty rule that would apply to brokers, as opposed to only financial advisors. Most investors do not realize and are usually shocked to learn that there broker only has an obligation to recommend “suitable” investments, and not to work in their client’s best interests. Currently, the fiduciary duty rule only applies to financial advisors (and brokers under certain circumstances).

H. Beck, LaSalle, and J.P. Turner Sanctioned for Inadequate Supervision of Consolidated Reports

May 12, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned three firms, H. Beck, Inc. (H. Beck), LaSalle St. Securities, LLC (LaSalle), and J.P. Turner & Company, LLC (JP Turner) – with fines of $425,000, $175,000 and $100,000, respectively concerning inadequate supervision of consolidated reports provided to customers.

As a background, a consolidated report is a single document that combines information regarding a customer’s financial holdings. Consolidated reports are used to supplement, but do not replace, official account statements disseminated by brokerage firms and market makers. FINRA released a regulatory notice reminding firms that consolidated reports must be clear, accurate and not misleading. Because these reports are not official reports FINRA is concerned that if consolidated report making is not rigorously supervised there is the potential for communications to be inaccurate, confusing, or misleading to customers. Consolidated reports can also be used for fraudulent or unethical purposes.

In the agency’s findings, FINRA determined that numerous registered representatives of the three firms prepared and disseminated consolidated reports to customers either without adequate review or any prior review by a principal. In particular, H. Beck and J.P. Turner did not have any written procedures specifically addressing the use and supervision of consolidated reports. In addition, while LaSalle had written procedures related to consolidated reports, it failed to enforce the procedures.

James Neilsen and Catherine Sheridan Accused of Being Involved Ulysses Partners Unregistered Securities

May 11, 2015 | by Staff Attorney

The attorneys of Gana Weinstein LLP are investigating a series of actions by the Connecticut Department of Banking (the Commissioner) involving James Neilsen (Neilsen), Neilsen Financial Services (NFS), Ulysses Partners, LLC (Ulysses), and Catherine Sheridan (Sheridan) and allegations that Neilsen sold over $10,000,000 in unregistered securities offerings to customers. The actions are Docket No. CRF-13-8014-S and CRF-15-8175-S. The Commissioner alleged that from approximately November 2005 through approximately December 2010, Neilsen offered and sold approximately $10 million of securities to at least ten Connecticut investors who were mostly his CPA clients. These funds were allegedly used primarily to finance Ulysses’ business expenses.

Neilsen was previously registered as a broker-dealer agent of Tradition Asiel Securities Inc. (Tradition Asiel) from December 17, 2004 to July 2, 2007, and with Sound Securities, LLC (Sound Securities) from August 7, 2008 to December 9, 2009. Neilsen was also registered with the National Futures Association (NFA) as an associated person of Longship Alternative Asset Management (Longship) from April 5, 2010 to December 29, 2010. In addition, Neilsen has been a Certified Public Accountant (CPA) with the Connecticut State Board of Accountancy since October 9, 1986. Neilsen was a founding member, chief financial officer, and treasurer of Ulysses and handled all of Ulysses’ day-to day financial decisions. Ulysses is now a defunct Illinois limited liability company but was a third-party marketer of hedge funds whose main function was to introduce and market hedge funds to financial institutions in exchange for the hedge funds paying Ulysses a fee.

According to the Commissioner Neilsen along with three other parties formed Ulysses as a self-described “third-party marketer” to solicit and refer prospective institutional investors to hedge funds. Two of those parties resigned from Ulysses within several months of Ulysses’ inception and were never actively involved in Ulysses’ activities. The third party, Sheridan was alleged to be a founding member, chief executive officer, and control person of Ulysses until she resigned from Ulysses in 2010. The Commissioner claimed that Sheridan handled all of the marketing and networking functions at Ulysses. The Commissioner found that Sheridan and Neilsen split revenues generated by Ulysses equally. In addition, Sheridan was previously registered as a broker-dealer with Tradition Asiel from August 10, 2004 to July 2, 2007, and with Sound Securities from July 25, 2007, to October 7, 2010. Sheridan is currently registered with FINRA as a general securities representative, general securities principal, options principal and equity trader with the brokerage firm North South Capital, LLC (North South). Sheridan is also currently registered with PE Investments LLC, a commodity pool operator associated with the NFA.

Prospera Financial’s Douglas Dannhardt Suspended Over Excessive Trading Claims

May 7, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) fined and suspended broker Douglas Dannhardt (Dannhardt) concerning allegations that between January 2010, and December 2011 Dannhardt engaged in several different violations of the industry’s rules including: 1( excessive and unsuitable trading in three IRA accounts (also known as churning); 2) improperly exercising discretion in these three accounts by executing transactions days and weeks after obtaining customer approval; 3) accepting trade orders for a customer’s account from a third party without written authorization.

Dannhardt became associated with a FINRA firm in 1984. From March 1995 through December 2013, Dannhardt was employed by Prospera Financial Services. Inc, (Prospera). The firm filed a Form U5 for Dannhardt as a result of his voluntary resignation from the firm.

Under the FINRA rules excessive trading occurs when: (1) a broker exercises control over a customer’s account: and (2) the amount of trading activity in that account is inconsistent with the customer’s investment objectives, financial situation, and needs. This conduct violates FINRA’s suitability standards. When making such a determination FINRA looks to see if the trading in an account can becomes so quantitatively unsuitable by unreasonably raising the costs associated with the investment strategy to the point where the additional risk in order to generate the return is not offset by those costs.

National Securities Broker Vito Balsamo Under FINRA Investigation Over V.W. Industries Sales

May 6, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) has filed a complaint against broker Vito Balsamo (Balsamo) concerning allegations that Balsamo engaged in private securities transactions – also known as “selling away” – in ownership interests in a limited liability company called V.W. Industries, LLC (VWI) without first receiving written approval from his member firm. FINRA also alleged that Balsamo failed to provide testimony requested by FINRA staff.

According to the BrokerCheck records kept by FINRA Balsamo has been the subject of at least 4 customer complaints, 2 criminal matters, one regulatory action, and one judgment and lien over the course of his career. Customers have filed complaints against Balsamo alleging a litany of securities law violations including that the broker made unsuitable investments, unauthorized trades, breach of fiduciary duty, misrepresentations and false statements, and churning, among other claims. The claims involve different investment recommendations including claims involving equity securities among other speculative securities.

Balsamo entered the securities industry in 1991. From 1999 until May 2008, Balsamo was associated with Joseph Stevens & Company, Inc. Thereafter, from April 2008, until February 2012, Balsamo was associated with National Securities Corporation (National Securities).

Broker Investigation: Brian Decker Churning Claims

May 5, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Brian Decker (Decker) has been the subject of at least 10 customer complaints and 2 judgments and liens over the course of his career. Customers have filed complaints against Decker alleging a litany of securities law violations including that the broker made unsuitable investments, unauthorized trades, breach of fiduciary duty, misrepresentations and false statements, and churning, among other claims. The claims involve different investment recommendations including claims involving equity securities among other speculative securities.

Decker entered the securities industry in 2006 with brokerage firm J.P. Turner & Company, L.L.C. Thereafter, in January 2007 through June 2009, Decker was associated with brokerage firm vFinance Investments, Inc. Finally since September 2009, Decker has been registered with Legend Securities, Inc. in Trinton Falls, New Jersey.

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. When brokers engage in churning the investment trading activity in the client’s account serves no reasonable purpose for the investor and is transacted to profit the broker through the generation of commission payments. The elements to establish a churning claim, which is considered a species of securities fraud, 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.

Paul Godlewski Formerly of Allstate Financial Barred Over Outside Business Activities Investigation

May 5, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned and barred broker Paul Godlewski (Godlewski) concerning allegations Godlewski refused cooperate with requests made by FINRA in connection with an investigation into possible outside business activities. Such activities may, under certain circumstances also involve investment transactions referred to as “selling away” in the industry. According to FINRA BrokerCheck records Godlewski has disclosed outside business activities include Preferred Systems, Inc., PA Tags & Notary, and certain rental property real estate interests. It is unclear whether FINRA’s investigation concerns these particular outside business activities.

Godlewski entered the securities industry in 2004, when he became associated with Allstate Financial Services, LLC (Allstate). Godlewski held a Series 6 license which is for an Investment Company and Variable Contracts Products Representative. On January 12, 2015, Allstate filed a termination notice (known as a Form U5) with FINRA disclosing that Godlewski was discharged from the firm.

According to FINRA, in March 2015, the agency began investigating whether Godlewski had engaged in outside business activities and failure to follow Allstate’s procedures concerning televised public appearances. As part of its investigation, on March 12, 2015, FINRA sent a request to Godlewski for certain documents and information. According to FINRA, Godlewski stated on a call with FINRA staff on March 16, 2015, that he will not cooperate with the investigation. Consequently, Godlewski was barred by FINRA.