Articles Tagged with Cambridge Investment Research

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shutterstock_185582-300x225Advisor Victor Rigoni (Rigoni), currently employed by Summit Brokerage Services, Inc. (Summit Brokerage) has been subject to at least three customer complaints.  According to a BrokerCheck report some of the customer complaints concern alternative investments and direct participation products (DPPs) such as non-traded real estate investment trusts (REITs), oil & gas programs, annuities, and equipment leasing programs.  The attorneys at Gana Weinstein LLP have extensive experience handling investor losses caused by these types of products.

In October 2018 a customer filed a complaint alleging that Rigoni violated the securities laws by being recommended alternative investments causing breach of contract, fraud, misrepresentation, breach of fiduciary duty, and violation of FINRA rules. The claim alleges $125,000 in damages and is currently pending.

Rigoni is also the subject of multiple tax liens in amounts totaling over $50,000.  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.

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shutterstock_61848763-300x203The investment attorneys at Gana Weinstein LLP are investigating customer complaints against Cambridge Investment Research broker John Provonost (Pronovost).

According to BrokerCheck records kept by the Financial Industry Regulatory Authority (FINRA), a customer alleged in February 2018 that Pronovost engaged in unsuitable investments.  Another customer alleged in March 2018 that Pronovost engaged in unsuitable investments and misrepresented the investor’s needs.

Pronovost allegedly sold the LJM Preservation and Growth Fund to multiple customers (LJMAX, LJMCX, LJMIX).  Investors may have been unaware of the risks associated with this investment, as the fund’s name belies its risky strategy. Gana Weinstein LLP has already filed a case against Cambridge Investment Research, Mr. Pronovost’s employer for the sale of the LJM Preservation and Growth Funds.

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shutterstock_94632238-300x214The Securities and Exchange Commission (SEC) recently filed a complaint against former Gradient Securities, LLC (Gradient) and Cambridge Investment Research, Inc. (Cambridge) broker Terry Bahgat (Bahgat) working out of the Amherst, New York.  The SEC alleged that from December 2014 through September 2016, Bahgat misappropriated funds seven different clients by obtaining access to their brokerage accounts and then transferring either to himself or WealthCFO – a company that Bahgat controlled.  Bahgat operated his advisory business through WealthCFO Advisors, LLC and other firm WealthCFO Partners, LLC.

According to the SEC, in order to effectuate the fraud in some cases Bahgat had his assistant pose as his clients on telephone calls with the brokerage firms in order to obtain bill paying privileges.  The SEC alleged that Bahgat’s scheme continued until September 2016 when he then fled the U.S. for Egypt.  The Financial Industry Regulatory Authority (FINRA) also barred Bahgat from the securities industry after he failed to respond to a request for information in January.  The FINRA investigation involved a different questionable practice – whether Bahgat made misrepresentations in the sale of a variable annuity.

Bahgat entered the securities industry in 1986.  From October 2010 until August 2015, Bahgat was associated with Cambridge.  From July 2015 until October 2016, Bahgat was registered with Gradient.

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shutterstock_103681238-300x300The investment fraud lawyers of Gana Weinstein LLP are examining multiple customer disputes filed with the Financial Industry Regulatory Authority (FINRA) against broker Scott Goldman (Goldman). Goldman’s FINRA BrokerCheck record shows several disclosures mainly pertaining to unsuitable investments.

In December 2016, an elderly customer alleged that during Goldman’s employment at LPL Financial Corporation, he recommended highly unsuitable investments that were heavily concentrated in risky, leveraged precious metal products. In addition, the broker did not properly inform his client of the risks associated with such an investment. This dispute was settled in December 2016, and resulted in $10,000 penalty and Goldman was suspended from the industry.

Another case against Goldman was filed in October 2014 for allegedly making unsuitable recommendations, failing to supervise, and breaching his fiduciary duty during his employment at H. Beck Inc. The alleged damages were worth $250,000. The case was settled in November 2015 for $75,000.

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shutterstock_184149845The Financial Industry Regulatory Authority (FINRA) brought and enforcement action against broker Ralph Savoie (Savoie) (FINRA No. 2015046239401) resulting in a bar from the securities industry alleging that Savoie failed to provide FINRA staff with information and documents requested. The failure to provide those documents and information to FINRA resulted in an automatic bar from the industry. FINRA’s document requests related to the regulators investigation into claims the Savoie misappropriated more than $665,000 from at least one member firm customer.

FINRA’s investigation appears to stem from Savoie’s termination from Cambridge Investment Research, Inc. (Cambridge) in August 2015. At that time Cambridge filed a Form U5 termination notice with FINRA stating in part that the firm discharged Savoie under circumstances where there was allegations that Savoie failed to disclose and receive approval for an outside business activity. It is unclear the nature of the outside business activities from publicly available information at this time. However, Savoie’s Brokercheck disclosures reveal several outside business activities including working for the Savoie Financla Group, LLC in Baton Rouge, LA and as being and independent insurance agent for various companies.

Savoie entered the securities industry in 1973. From March 2007 until July 2013, Savoie was associated with ING Financial Partners, Inc. Thereafter, from July 2013 until September 2015, Savoie was associated as a registered representative with Cambridge.

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shutterstock_61848763According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Eric Wegner (Wegner) has been the subject of at least 5 customer complaints and two financial disclosures. Customers have filed complaints against Wegner alleging a number of securities law violations including that the broker made unsuitable investments, misrepresentations, breach of fiduciary duty, and false statements mostly in connection with recommendations to invest in private placements such as tenants-in-common (TICs) interests. In addition, one complaint involves a dispute over a variable annuity recommendation.

Wegner entered the securities industry in 2000. From December 2002, until December 2008, Wegner was a registered representative with Sammons Securities Company, LLC. Thereafter, from January 2009, until February 2011, Wegner was associated with QA3 Financial Corp. From February 2011, until July 2013, Wegner was associated with Sigma Financial Corporation. Finally, Wegner is currently a registered representative with Cambridge Investment Research, Inc. out of the firm’s Delafield, Wisconsin office location.

TIC investments have led to devastating investor losses and are in almost all cases unsuitable products. The near certainty of failure of investing in TICs as a whole has led to the product virtually disappearing as an offered investment from most reputable brokerage firms.   According to InvestmentNews “At the height of the TIC market in 2006, 71 sponsors raised $3.65 billion in equity from TICs and DSTs…TICs now are all but extinct because of the fallout from the credit crisis.” In fact, TICs recommendations have been a major contributor to bankrupting brokerage firms. For example, 43 of the 92 broker-dealers that sold TICs sponsored by DBSI Inc., a company whose executives were later charged with running a Ponzi scheme, a staggering 47% of firms that sold DBSI are no longer in business.

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shutterstock_73854277According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Robert Blake (Blake) has been the subject of at least six customer complaints, one criminal activity, and three regulatory actions. Customers have filed complaints against Blake alleging a number of securities law violations including that the broker made unsuitable investments, misrepresentations and false statements in connection with recommendations to invest in several different types of investments including private placements such as tenants-in-common (TICs) interests, variable annuities, and equity-indexed annuities.

Blake first became registered with a FINRA firm in 1974. From 2001 until November 2011, Blake was registered with Presidential Brokerage, Inc. Thereafter, Blake has been registered with Cambridge Investment Research, Inc. in the firm’s Greenwood Village, Colorado office. Blake operates out of business entity called Speer Wealth Management.

Both TICs and investment annuities have caused significant investment losses. The failure of the TIC investment strategy as a whole across the securities industry, TIC investments have virtually disappeared as offered investments.   According to InvestmentNews “At the height of the TIC market in 2006, 71 sponsors raised $3.65 billion in equity from TICs and DSTs…TICs now are all but extinct because of the fallout from the credit crisis.” In fact, TICs recommendations have been a major contributor to bankrupting brokerage firms. For example, 43 of the 92 broker-dealers that sold TICs sponsored by DBSI Inc., a company whose executives were later charged with running a Ponzi scheme, a staggering 47% of firms that sold DBSI are no longer in business.

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shutterstock_20002264The Financial Industry Regulatory Authority (FINRA) recently barred broker Michael Evangelista (Evangelista) concerning allegations that between 2006 and 2011, Evangelista referred approximately six of his firm customers to invest in real estate securities issued by ABC Corp. (ABC), an entity that purportedly invested in real estate in Pennsylvania and neighboring states. FINRA alleged that the customer investments totaled over $3 million while Evangelista received at least $50,000 in compensation in connection with these referrals. FINRA found that Evangelista did not disclose to his brokerage firms that these customers were purchasing securities away from the firm, a practice known as “selling away”, or that he was being compensated in connection with his referrals.

Evangelista entered the securities industry in 1993. From 1994 to December 2012, he was registered with the following FINRA firms: (1) Capital Analysts, Inc. until to December 2007; (2) Cambridge Investment Research, Inc. from January 2008 to May 2012; and (3) Comprehensive Asset Management and Servicing, Inc. (Comprehensive) from May 2012 to December 2012. Comprehensive filed a Form U5 on December 20, 2012, stating that Evangelista was terminated because he became the subject of a customer complaint.

FINRA alleged that starting in 2006, Evangelista participated in meetings with certain of his brokerage clients the president of ABC to have the clients invest with ABC. The investments were for the development of specific parcels of property. When client’s invested in ABC they acquired either promissory notes issued or limited partnership agreements. The promissory notes allegedly provided for a repayment of principal plus interest. Investments in the form of limited partnership agreements had clients receiving a percentage interest in the partnership that would yield a minimum return in the form of interest paid on a per annum basis and a return of principal.

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shutterstock_182054030The Financial Industry Regulatory Authority (FINRA) recently suspended former Cambridge Investment Research, Inc. (Cambridge) broker Steven Walstad (Walstad) alleging that Walstad recommended and effected numerous unsuitable Class A share mutual fund purchases and sales involving six customer accounts. In addition, FINRA alleged that Walstad exercised discretion in one customer’s account without the customer’s prior written authorization.

Walstad first became registered with a FINRA firm in 1996 and was associated with Cambridge from April 18, 2008, through November 30, 2012. FINRA alleged that Walstad recommended and executed 78 purchases of Class A share mutual funds in six customer accounts without a reasonable basis to believe were suitable for the customers. All financial advisors, as part of their suitability obligations, must have a reasonable basis for the investments that they recommend to customers. The reason that FINRA found that Walstad’s trades were without a reasonable basis is that the customers were charged front-end sales loads in connection with the Class A share purchases but Walstad mistakenly believed that these front-end sales loads had been waived.

Purchase of Class A shares, as opposed to purchasing Class B or C shares, is advantageous to the customers only if they held the mutual funds on a long-term basis. However, FINRA found that these customers held the Class A shares for less than thirteen months and therefore Walstad lacked a reasonable basis to believe that his recommendations to purchase Class A shares were suitable for these six customers.

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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.

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