Articles Tagged with AXA Advisors

shutterstock_136504499-300x200The securities attorneys at Gana Weinstein LLP are currently investigating advisor John Eads (Eads), formerly registered with Lion Street Financial, LLC (Lion Street Financial) and AXA Advisors, LLC (AXA Advisors) out of Titusville, Florida.  According to a BrokerCheck report,  Eads has been subject to at least seven customer complaints and one employment termination for cause during his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), many of the complaints against Eads concern allegations of variable annuity sales practices.

In January 2018 a customer alleged Eads over forgery.  In February 2018 Lion Street Financial discharged Eads claiming that he submitted client documents without their legal signatures.

In June 2016 a customer filed a complaint alleging that in March 2015 Eads recommended an unsuitable annuity causing damages.  The claim settled for $85,821.

In April 2016 a customer alleged that Eads misrepresented and unsuitably recommended variable annuities causing damages.  The claim was denied.

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shutterstock_20354401-300x200The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against John P. Correnti (Correnti), working out of Cleveland, Ohio. Correnti allegedly failed to provide FINRA staff with information and documents related to an investigation into claims that Correnti engaged in undisclosed outside business activities. The failure to provide those documents and information to FINRA resulted in an automatic bar from the industry.

Correnti began his securities career in 2007. From 2007 until 2015, Correnti was associated with MVP Financial. He moved to Forest Securities in 2015 and was with them for less than a year. Finally, he moved to AXA Advisors where he was terminated in less than a year.

According to BrokerCheck records, Correnti was terminated by AXA Advisors in July 2016 “due to his apparent involvement in the possible market manipulation of a low price security.”

shutterstock_184430612The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Ronald Benevento (Benevento) (FINRA No. 20130353695) alleging that between September 2011 through April 2013 Benevento engaged in unsuitable mutual fund switching activity in three customer accounts in violation of the FINRA Rules. In addition, FINRA alleged that during this time Respondent mismarked 15 order tickets as “unsolicited” causing the books and records of his employer, American Portfolios Financial Services, Inc. (American Portfolios) to become inaccurate.

Benevento first became associated with a FINRA member in 1997. From 1997 until February 2010, Benevento was a registered representative of AXA Advisors, LLC. Thereafter, from March 2010, until March 2015, Benevento was associated with American Portfolios.

FINRA alleged that, Benevento recommended 29 mutual fund switch transactions in three customer accounts without having reasonable grounds for believing that the transactions were suitable for the those customers due to the frequency of the transactions and the costs incurred due to the switches. In these transactions, FINRA alleged that Benevento recommended that the customers sell Class A mutual fund shares within as little as two to three months after recommending the purchase of them. These purchases were made in different mutual fund families than the previous purchase.

shutterstock_146470052This article follows up on a recent article reported in Reuters concerning Atlas Energy LP’s private placement partnerships in oil and gas. Atlas Resources LLC, a subsidiary the energy group, has filed documents with the SEC for Atlas Resources Series 34-2014 LP stating that it seeks to raise as much as $300 million by Dec. 31 of 2014. The deal allows investors to participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of oil into viable prospects. In addition, Atlas promises to invest up to $145 million of its own capital alongside investors.

In the last article we explored how the house seems more likely to win on these deals over investors. But beyond the inherent risks with speculating on oil and gas and unknown oil deposits most investors don’t realize the deals are often unfair to investors. In a normal speculative investment as the investment risk goes up the investor demands greater rewards to compensate for the additional risk. However, with oil and gas private placements the risks are sky high and the rewards simply don’t match up.

In order to counter this criticism, issuers say that the tax benefits of their deals where the investor can write off more than 90 percent of their initial outlay the year they make it helps defray the risk and increase the value proposition. First, the same tax advantage claims are often nominal compared to the principal risk of loss of the investment as seen by Puerto Rican investors in the UBS Bond Funds who have now seen their investments decline by 50% or more in some cases. Second, often times brokers sell oil and gas investments indiscriminately to the young and old who have lower incomes and cannot take advantage of the tax benefits.

shutterstock_103610648As recently reported in Reuters, Atlas Energy LP has marketed itself to investors as a way to get into the U.S. energy boom. By contributing at least $25,000 in a private placement partnership that will drill for oil and gas in states such as Texas, Ohio, Oklahoma and Pennsylvania and share in revenues generated from the wells. Atlas Resources LLC, a subsidiary the energy group, has filed documents with the SEC for Atlas Resources Series 34-2014 LP stating that it seeks to raise as much as $300 million by Dec. 31 of 2014. The deal sounds good when pitched: participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of fossil fuels into potentially viable prospects and to boot Atlas will invest up to $145 million of its own capital alongside investors. Through this method and similar deals, oil and gas projects have issued nearly 4,000 private placements since 2008 seeking to raise as much as $122 billion.

But before you take the plunge a review of the Atlas’s offering memorandum reveals some red flags and given Atlas’ past failure rate investors should think twice. First, up to $45 million of the money raised will be paid to Atlas affiliate Anthem Securities that will then be turned over to as commissions to broker-dealers who pitch the deal to investors. Up to $39 million more will be used to buy drilling leases from another affiliate. Think investors will get a fair price on the leases when Atlas controls both sides of the deal? More conflicts ahead as Atlas affiliated suppliers may also get up to $53 million for buying drilling and transport equipment. Next, an additional $8 million of Atlas’s investment is a 15 percent markup on estimated equipment costs. Finally, Atlas will pay itself nearly $52 million in various other fees and markups.

In sum, at least 40% of Atlas’s $145 million investment alongside mom and pop goes right back to the company. In addition, Atlas’ profits don’t stop there, when the venture starts generating revenue Atlas is entitled to 33% before accounting for those payments and markups. In the end, not much of a risk at all for Atlas.

shutterstock_184430645The Financial Industry Regulatory Authority (FINRA) recently sanctioned MML Investors Services, LLC (MML Investors a/k/a MassMutual Life Insurance Company) broker Monte Miron (Miron) concerning allegations that Miron made unauthorized trades in client accounts and that the broker failed to disclose certain tax liens on his Form U4 in a timely manner.

Miron first became registered with member firm Dean Witter Reynolds Inc. in September 1982. Miron has been registered with 11 firms between October 1998 and August 2012. From 2005 to January 2008, Miron was associated with MetLife Securities Inc. From December 2007 through September 2012, Miron was a representative with AXA Advisors, LLC.

According to Miron’s brokerage disclosures the broker has had three customer complaints filed against him. The complaints involve allegations of account manipulation, excessive trading, and a misrepresentation concerning a variable annuity.

Governor Andrew M. Cuomo announced on March 17, 2014, that AXA Equitable (AXA) agreed to a consent order to pay a $20 million fine to the New York Department of Financial Services (DFS) for violations relating to certain variable annuity products.  The DFS investigation uncovered that AXA made changes to certain variable annuity products that limited potential returns for existing customers without providing adequate notice to New York.  New York stated that AXA’s omissions limited the DFS’ ability to protect consumer by requiring existing customers to affirmatively “opt in” to the altered product rather than remaining in that investment by default.  According to New York, AXA’s actions affected tens of thousands of New Yorkers with variable annuity products at AXA.

A variable annuity is complex bundled financial and insurance product.  A variable annuity is a contract with an insurance company where the insurer agrees to make periodic payments to you and the investor chooses the investments made in the annuity.  The value of your variable annuity will vary depending on the performance of the investment options chosen. The investment options for a variable annuity are usually mutual funds.

The Securities and Exchange Commission (SEC) released a publication entitled: Variable Annuities: What You Should Know.  In the publication, the SEC encouraged investors considering a purchase of a variable annuity to “ask your insurance agent, broker, financial planner, or other financial professional lots of questions about whether a variable annuity is right for you.”  Often times the benefits of variable annuities are outweighed by the other provisions including surrender charges, mortality and expense charges, management fees, and rider costs.  Variable annuities are also high sales commission products for financial advisors and sometimes advisors push these products on persons who do not need them or cannot benefit from them.  For example, since an IRA account is already tax deferred it makes little sense to use an IRA account to hold a variable annuity investment.

The Financial Industry Regulatory Authority (FINRA) recently sanctioned broker Michael James Blake (Blake) over allegations that Blake engaged in the unlawful sale of securities including, upon information and belief, securities linked to Longest Drive, LLC and Grace Communities, LLC.  According to FINRA, Blake participated in private securities transactions involving the investment of more than $3.2 million by approximately 28 investors in 3 investment contracts without providing prior written notice to his firms of his proposed roles in the transactions.  FINRA imposed a $10,000 fine and banned Blake from association with any broker-dealer for one year.

The allegations against Blake are consistent with a “selling away” violation.  Selling away occurs when a securities broker solicits securities that were not approved by the broker’s affiliated firm.  Selling away is a violation of FINRA Rule 3040. The most common securities sold away from brokerage firms involve private placements and promissory notes.  Investors are often completed unaware that the broker’s sales activity is improper.  In addition, the investor does not learn that the broker’s activities were wrongful until the investment scheme is publicized, the broker is sanctioned, or the broker stops returning client calls.

FINRA’s order states that between approximately February 2006 and June 2007, Blake recommended to customers to invest $3,200,000 in real estate properties being developed by entity “GC”, which is believed to stand for Grace Communities.  The invested funds were provided by 28 investors.  According to FINRA, 6 persons invested $250,000 in Development 1 between August and November 2006, 3 persons invested $200,000 in Development 2 in October and November 2006, and 23 persons invested approximately $2,755,000 in Development 3 between February 2006 and June 2008.  According to FINRA, as of September 9, 2013, investors in Blake’s real estate investments have not received a return of their principal or any interest or other payments.

The Securities and Exchange Commission filed a complaint against Larry J. Dearman (Dearman), Sr. Marya Gray (Gray), Bartnet Wireless Internet Inc., The Property Shoppe, Inc., and Quench Buds Holding Company LLC. Dearman and Gray allegedly created an illegal scheme that fraudulently raised at least $4.7 million from thirty (30) of Deaman’s advisory clients. Dearman promised the clients that their money would be invested into lucrative investments. However, according to the SEC, Dearman and Gray squandered the funds by gambling, paying for personal expenses, and making payments to other businesses controlled by Gray.

Dearman is currently not registered as a broker with FINRA; however Dearman was registered with various brokerage firms from 2005 until 2012. From April 2002 until February 2005 Dearman was registered with the firm AXA Advisors, LLC. Upon leaving AXA Advisors, Dearman joined Brecek & Young Advisors, Inc. until January 2009. From January 2009 until February 2010 Dearman joined  Securities America, Inc. Finally, Dearman was a broker with Cambridge Legacy Securities LLC from February 2010 until May 2012.

The SEC Complaint explains between December 2008 and August 2012 Dearman raised $1.7 million through the sale of promissory notes for Bartnet, a wireless internet service, whose majority shareholder was Gray. In addition, Dearman raised $2 million for a second Gray-controlled company, the Property Shoppe. Finally, in 2012 Dearman recommended his clients invest in Quench Buds, four convenient stores owned by Gray. Instead of investing the capital raised, Dearman and Gray allegedly allocated the funds to personal gambling expenses and payments to investors in the ponzi scheme.

Diego Fernando Hernandez (Hernandez) was recently barred from the financial industry by the Financial Industry Regulatory Authority (FINRA) concerning allegations that he failed to disclose outside business activities, a practice known in the industry as “selling away” and misused customer funds.

Hernandez entered the securities industry in May 1998.  In August 2005, Hernandez became a registered representative of AllState Insurance Company until April 2012.  In April 2012, Hernandez became a registered representative of AXA Advisors, LLC (AXA) until February 2013.  On Hernandez’s public securities disclosures he is listed as the owner of H.D. Mile High Marketing a marketing, advertising, and banner company located in Lakewood, Colorado.  In February 2013, AXA filed a termination notice for Hernandez disclosing that his employment was terminated by the firm for failure to comply with the firm’s policies and FINRA’s rules in connection with undisclosed outside business activity and the commingling and conversion of customer funds.

While Hernandez was associated with AXA, FINRA alleged that he engaged in at least three outside business activities that were not disclosed to or approved by the firm.  In March 2012, Hernandez filed articles of organization, forming Wealth Management Partners LLC (Wealth Management Partners) where Hernandez serves as Wealth Management’s president and chief executive officer.  In February 2010, Hernandez formed Team Cure Racing as a nonprofit corporation under the laws of Colorado.  In November 2009, Hernandez formed DFHR Investments, Inc. (DFHR Investments) under the laws of Colorado.  Hernandez is the president of DFHR Investments.  Hernandez filed the Wealth Management Partners, Team Cure Racing, and DFHR Investments corporate formation documents before he joined AXA.