Articles Tagged with Financial West Group

shutterstock_157506896-300x300The attorneys at Gana Weinstein LLP are investigating BrokerCheck records reports that financial advisor Stuart Godin (Godin), currently employed by Western International Securities, Inc. (Western International) has been subject to at least eight customer complaints during the course of his career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Godin’s customer complaints alleges that Godin recommended unsuitable investments in various investments such as promissory notes, managed commodities, and other investments among other allegations of misconduct relating to the handling of their accounts.

In May 2019 a customer complained that Godin violated the securities laws by alleging that Godin made misrepresentation and incompetence on stock selections from 2018 to 2019. The claim alleged $35,000 in damages and settled for $9,000.

In November 2017 a customer complained that Godin violated the securities laws by alleging that Godin caused losses due to the financial advisor’s unsuitable recommendation to invest in a managed futures fund from November 2012 through 2016.  The claim alleged $50,000 in damages and settled for $20,000.

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shutterstock_182371613-300x200The law offices of Gana Weinstein LLP are currently investigating advisor Paul Soll (Soll), formerly registered with Western International Securities, Inc. (Western International) and Financial West Group (FWG) out of Los Angeles, California.  According to records kept by The Financial Industry Regulatory Authority (FINRA), Soll was barred from the financial industry for failing to provide the regulator with information about his trading activities that concern possible excessive trading a securities law violation that is similar to churning.  According to a BrokerCheck report, Soll also disclosed at least one customer complaint alleging breach of fiduciary duty.

In July 2018, FINRA stated that Soll violated FINRA Rules 8210 and 2010 by failing to provide the regulator with information about his potential trading abuses.  Soll was thereby barred from the securities industry.

Moreover, a customer filed a complaint alleging that Soll engaged in breach of fiduciary duty, breach of contract, and misrepresentation in the sale of bonds.  The amount of damages was not specified.  The claim settled for $660,574.

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shutterstock_57938968-200x300According to BrokerCheck records the CEO and Chief Compliance Officer of Firm Financial West, Gene Valentine (Valentine) has been subject to one customer complaint, three tax liens, and one regulatory action.  According to records kept by The Financial Industry Regulatory Authority (FINRA) Valentine has been accused by FINRA of failing to have supervisory procedures for due diligence on private placement offerings.

FINRA alleged that from October 1, 2008, through June 30, 2015, Financial West’s written supervisory procedures failed to address the firm’s due diligence process for private placements. FINRA found that Financial West’s written supervisory procedures did not describe the process for approving private placement offerings and did not describe how or when to evaluate private placement offerings.  FINRA also found that the firm failed to consistently follow the written procedures that did exist such as failing to document the review as described in the procedures.

Under FINRA Regulatory Notice 10-22 firms are provided with detailed guidance while reminding them of their “obligation to conduct a reasonable investigation of the issuer and the securities they recommend” in private placement offerings.  The notice also provides that a firm’s supervisory procedures must be reasonably designed to ensure that the firm engages in a rigorous due diligence process.  In order to comply with FINRA’s rules and “[t]o demonstrate that it has performed a reasonable investigation, a [firm] should retain records documenting both the process and results of its investigation.”  In this case, FINRA found that Financial West failed to meet these requirements.

shutterstock_183554579-300x200Our firm is investigating claims made by various regulators and brokerage firms including Axiom Capital Management, Inc. (Axiom) and Financial West Group (FWG) concerning broker Sara Eng (Eng a/k/a Sara Aiping Ng).  Eng is currently associated with brokerage firm Moloney Securities Co., Inc. (Moloney).

The allegations revolve around Eng’s offering of investments to clients.  In October 2015, FWG terminated Eng for cause and allowed Eng to voluntarily resign after allegations were made that   Eng was being placed on heightened supervision for potential violation of firm policy regarding marketing of investments to firm customers.  Thereafter, in September 2016, Axiom terminated Eng for cause for violation of the firm’s policies and procedures regarding email correspondence.  At the same time The Financial Industry Regulatory Authority’s (FINRA) opened its own investigation into Eng concerning Axiom’s disclosures for Eng’s termination.  At this time it is unclear the exact nature and extent of the investigation.

Eng entered the securities industry in 1997.  From November 2002 until March 2014, Eng was associated with Berthel, Fisher & Company Financial Services, Inc.  From February 2014 until November 2015, Eng was associated with FWG.  From October 2015 until September 2016, Eng was registered with Axiom.  Finally, since November 2016 Eng  has been registered with Moloney out of the firm’s Oak Brook, Illinois and Flushing, New York office locations.

shutterstock_183525509The investment attorneys at Gana Weinstein LLP have recently filed a case on behalf of an investor in the Vertical Fund private placements.  The investor purchased a Vertical Fund private placement through Financial West Group broker Jeffrey Gieseke.  The Vertical Funds include Vertical Recovery Management, LLC, Vertical Mortgage Fund I, LLC, Vertical US Recovery Fund, LLC, and Vertical US Recovery Fund II, LLC.  These funds were marketed to investors as as buying real estate notes at a discount that would pay income and then allow investors to profit through a future sale.  However, in September 2015, these funds entered a bankruptcy alternative through a General Assignment for Benefit of Creditors under California law.  Investors can expect to suffer substantial losses on their investment.

In addition, an action is pending against the accounting company for the Vertical Funds naming Haynie & Company of California Accountancy Corporation and Michael Zurovski as defendants for aiding and abetting the conversion of funds among other claims.  According to the complaint, beginning at least as early as 2011, assets from Vertical Funds I and II were diverted to Vertical Fund Group and other entities.  Assets were falsely titled “Acquisition Deposits” in the amounts of over $1.9 and $4.0 million respectively for the two funds.  These accounts were titled in a way to suggest they were related to the acquisition of mortgages in the ordinary course of business but instead these amounts represented transfers to Vertical Fund Group seemingly for use in paying the costs of operation of the entirety of the Vertical Group.  The complaint alleges that these payments were impermissible advances and were an improper use of funds under the terms of the offering documents and operating agreements and represent a breach of fiduciary duty on behalf of the fund manager.

Private placement offerings are among the most speculative and costly investment products offered to retail investors. While the size of the private placement market is unknown, according to 2008 estimates, companies issued approximately $609 billion of securities through Regulation D offerings. Private placements allow many small companies to efficiently raise capital. However, regulators continue to find significant problems in the due diligence and sales efforts of some brokerage firms when selling private placements to investors. These problems include fraud, misrepresentations and omissions in sales materials and offering documents, conflicts of interest, and suitability abuses.

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.

The Financial Industry Regulatory Authority (FINRA) fined brokerage firm Financial West Investment Group, Inc. d/b/a Financial West Group (Financial West Group) over allegations between March 2009 and May 2010, the firm did not provide accurate variable annuity disclosures to customers concerning certain fees and charges.  FINRA also alleged that Financial West Group failed to have an adequate written supervisory procedure to ensure that customers received accurate disclosures about these fees and charges.  Finally, FINRA alleged that Financial West Group did not adequately enforce its policies for reviewing emails.  In resolving these allegations Financial West Group paid a $35,000 fine.

Financial West Group’s main offices are in Westlake Village, California.  The firm has approximately 116 registered branch offices and employs 290 registered brokers.

FINRA alleged that between March 2009, and May 2010, the Financial West Group used forms called variable annuity disclosure and investment form, request to switch investments form, and the product comparison worksheet to inform customers of various features of deferred variable annuities.  The forms included information concerning the potential surrender period and surrender charge, potential tax penalty if customers sell or redeem deferred variable annuities before reaching the age of 59 1/2, mortality and expense fees, the potential charges for and features of riders, the investment options, death benefits, payment options, and risks disclosures. However, according to FINRA, Financial West Group did not provide accurate disclosures to customers in 28 out of 93 (30%) of the variable annuity transactions and exchanges reviewed by the regulator.

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