Fraud

Broker Spotlight: Shawn Burns of Salomon Whitney

February 5, 2015 | by Staff Attorney

The law offices of Gana Weinstein LLP are investigating a string of customer complaints against broker Shawn Burns (Burns) currently registered Salomon Whitney LLC (Salomon). According to The Financial Industry Regulatory Authority (FINRA) BrokerCheck system, the customer complaints primarily allege unauthorized trading, failure to execute, suitability, misrepresentation, fraud, churning, and breach of fiduciary duty.

Burns has been in the industry since 1999. In only 15 years Burns has been employed by 10 different firms. After leaving Westrock Advisors, Inc. in May 2007, Burns became registered with J.P Turner & Company, L.L.C. until June 2009. From June 2009, until July 2011, Burns was registered with First Midwest Securities, Inc. Thereafter, Burns was registered with Salomon until August 2012. Then Burns became associated with Cape Securities Inc. until April 2014 before again going back to Salomon where he is currently registered.

Burns has had 12 customer complaints filed against him during his career, one termination, and five judgments or liens. These statistics are troubling because so many customer complaints are rare. According to InvestmentNews, only about 12% of financial advisors have any type of disclosure event on their records. These disclosures do not necessarily have to include customer complaints but can include IRS tax liens, judgments, and even criminal matters. The number of brokers with multiple customer complaints is far smaller.

UBS Preparing to Face Investor Claims Over Puerto Rico Bond Funds

September 23, 2014 | by Staff Attorney

According to UBS’ second quarter earnings report, the bank is now looking at over $600 million in claims brought by Puerto Rico investors, who have suffered significant losses related to their investments in closed-end bond funds. The Financial Industry Regulatory Authority (FINRA) has been inundated with a plethora of claims in connection with the closed-end UBS Puerto Rico Bond Funds. Investors are looking to be made whole after they purportedly received misleading information regarding these investments. While the majority of the claims were filed against UBS Financial Services of Puerto, other firms, including Merrill Lynch, Banco Popular, Santander Securities, and Oriental Financial Services have also been named as Respondents in many of the claims.

UBS recognizes the perilous situation that it now faces with respect to these claims, explaining, “declines in the market prices of Puerto Rico municipal bonds and of UBS Puerto Rico sole-managed and co-managed closed-end funds since August 2013 have led to multiple regulatory inquiries, as well as customer complaints and arbitrations with aggregate claimed damages exceeding [$]600 million filed by clients in Puerto Rico who own those securities.”

Some of the claims that UBS face, including clients represented by our firm, include allegations of unsuitability, over-concentration, fraud, and breach of contract among others. FINRA and the Municipal Securities Rulemaking Board require broker dealers to have a reasonable basis to support the suitability of their recommendations to customers. Legal representatives for many claimants have said that the UBS employees prioritized commissions when they sold the closed-end bond funds to Puerto Rican investors, who were not economically equipped to make those investments.

IRS Brings Charges Against Barred Broker William Bucci

August 23, 2014 | by Staff Attorney

Back in Decmeber 2013, the law offices of Gana Weinstein LLP reported that “Former Ryan Beck and Oppenheimer Financial Advisor William Bucci Barred From the Financial Industry” where we reported that The Financial Industry Regulatory Authority (FINRA) barred Bucci for allegedly accepting 19 personal loans totaling $635,000 from nine customers in violation of FINRA rules. FINRA also alleged that Bucci willfully failed to amend his Form U4 to disclose material facts relating to two judgments that were entered against him. In addition to these claims, several customers filed complaints alleging that Bucci sold illegal promissory notes.

Recently, a combined investigation by the IRS and the FBI led to the filing of a federal complaint in the Eastern District Court of Pennsylvania against Bucci in connection with the foregoing activities. The complaint alleged that Bucci willfully made Individual Income Tax Return, Form 1040, for the calendar years 2007, 2008, 2009, and 2010 that falsely understated his income.

In addition, a second superseding indictment was filed against Bucci on July 22, 2014, by the United States Attorney’s Office for the Eastern District of Pennsylvania alleging that Bucci was running an investment fraud scheme that deceived investors into turning over more than $3.2 million. According to a press release issued by the office, Bucci told his victims he was starting a wine and high end olive oil import business to import the goods from Italy. The release stated that Bucci was a licensed stockbroker and a non-lawyer elector on the Pennsylvania Court of Judicial Discipline who never had an olive oil and wine business. The release also alleged that Bucci also solicited individuals to loan money for the purchase of real estate. According to the indictment, Bucci used the funds to supplement his income and to support his lifestyle as well as to make payments to earlier victims.

Ronald Anglin Investigated by the SEC Over Charges of Securities Fraud

January 15, 2014 | by Staff Attorney

The Securities and Exchange Commission (SEC) instituted administrative proceedings against broker Ronald Gene Anglin (Anglin), formerly of Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch), on allegations that Anglin engaged in securities fraud by forging letters of authorization from a Merrill Lynch customer to be sent by mail to addresses designated by Anglin.

From 2004 through October 2008, Anglin was a registered representative of Citigroup Global Markets, Inc. Thereafter, Anglin was a registered representative of dually registered broker-dealer and investment adviser Merrill Lynch until May 2011. Anglin also was an investment adviser representative for Merrill Lynch. Anglin is 38 years old and is a resident of Canyon Country, California.

On October 4, 2012, Anglin pleaded guilty to one count of mail fraud before the United States District Court for the Central District of California in U.S. v. Ronald Gene Anglin, 2:12-CR-00232-SJO. On March 25, 2013, Anglin was sentenced to three years of probation including 27 months in home detention, and ordered to make restitution in the amount of $73,000.

Former Merrill Lynch Broker David Zeng Barred From the Financial Industry

November 21, 2013 | by Staff Attorney

David G. Zeng (Zeng) was recently barred from the financial industry by The Financial Industry Regulatory Authority (FINRA) over allegations that the broker failed to respond to the regulator’s inquiries concerning at least a dozen customer disputes initiated against the broker. The customer complaints against Zeng include claims of misrepresentations, fraud, unsuitable investments, and unauthorized trading concerning stock investments.

It is also possible that Merrill Lynch, Pierce, Fenner & Smith Inc. (Merrill Lynch), Zeng’s employing firm during the majority of the customer complaints, failed to properly supervise Zeng’s securities activities. Under FINRA Rule 3010, a brokerage firm is obligated to properly monitor and supervise its employees. The rule states that “[e]ach member shall establish and maintain a system to supervise the activities of each registered representative…that is reasonably designed to achieve compliance with applicable securities laws and regulations…” Thus, brokerage firms are responsible for monitoring a broker’s investment recommendations to clients, outside business activities, and representations to investors.

Zeng became registered with FINRA in 2001 at Morgan Stanley Dean Witter Inc until June 2005. From June 2005 until May 2009, Zeng was associated with UBS Financial Services, Inc. Thereafter, from April 17, 2009, until December 20, 2011, Zeng was employed by Merrill Lynch and worked out of the firm’s Santa Fe, New Mexico office.

FINRA Arbitration Panel Awards BBVA Securities’ Investors $1.2 Million

November 8, 2013 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) Arbitration Panel has awarded damages to investors in the amount of $1.2 million in compensatory damages and cost of fees associated with the arbitration. The alleged claim was asserted against BBVA Securities of Puerto Rico, Inc. (BBVA Securities) and employees of the brokerage firm.

BBVA Securities is a brokerage firm in San Juan, Puerto Rico.

The Claimants asserted breach of fiduciary duty, unsuitable investments, churning and excessive trading, failure to supervise and gross negligence. These causes of actions related to allegedly unsuitable naked option trading strategy combined with the use of margin which caused losses in the investor’s accounts.

FINRA Bars Broker Over Allegations of Churning (Excessive Trading) and Unauthorized Trading in Customer Accounts

October 7, 2013 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) has barred Chad David Kelly (Kelly) concerning allegations of churning (excessive trading) and unauthorized trading. “Churning” is excessive investment trading activity that serves little useful purpose or is inconsistent with the investor’s objectives and is conducted solely to generate commissions for the broker. Churning is also a type of securities fraud.

FINRA alleged that Kelly willfully violated Section 10(b) of the Securities Exchange Act of 1934 (“Exchange Act of 1934”), Rule 10b-5, and violated FINRA Rules 2020, and 2010, NASD Rules 2120, 2110, 2310, and IM-2310(a) and (b).

According to FINRA, excessive trading violation occurs when: 1) a broker has control over the account and the trading in the account, and 2) the level of activity in that account is inconsistent with the customer’s objectives and financial situation. Where an intent to defraud or reckless disregard for the customer’s interests is present the activity is also churning. Section 10(b) of the Exchange Act of 1934 prohibits the use of “any manipulative or deceptive act or practice” in connection with the purchase or sale of a security and Rule 10b-5 prohibits “any device, scheme, or artifice to defraud.” NASD Rule 2310(a) provides that when recommending the purchase, sale, or exchange of any security a broker “shall have reasonable grounds for believing that the recommendation is suitable for such customer…” A broker’s recommendations must “be consistent with his customer’s best interests.” NASD IM-2310-2(a)(1) also require that the broker must “’have reasonable grounds to believe that the number of recommended transactions within a particular period is not excessive.” NASD IM-2310-2(b)(2) prohibits brokers from excessively trading in customer accounts.

Robert Gist Fined $5.4 Million by the SEC and Barred From the Financial Industry

September 29, 2013 | by Staff Attorney

Robert Gist (Gist) was recently fined $5.4 million by the Securities and Exchange Commission (SEC) and barred from association with any broker-dealer by the Financial Industry Regulatory Authority (FINRA). Gist has been accused by both regulators of converting the funds of at least 30 customers in order to pay personal expenses and to fund the operations of a company controlled by Gist.

Gist resides in Atlanta, Georgia and is the president of Gist, Kennedy & Associates, Inc., (Gist Kennedy) a law firm specializing in estate planning and investments. Gist is licensed to practice law in Georgia and has represented professional athletes as a sports agent. From approximately 2002 through early 2013, Gist was CEO and president ENCAP Technologies, LLC (ENCAP), a company with its principal place of business in Roswell, Georgia. ENCAP is in the business of developing industrial coatings for metal surfaces to prevent corrosion. Gist has been associated or registered with numerous brokerage firms since the 1980s. Most recently, Gist was registered with Resource Horizons Group LLC from March 2001 until his December 2011.

On May 31, 2013, the SEC charged Gist and Gist Kennedy with defrauding at least 32 customers out of at least $5.4 million while acting as an unregistered broker from approximately 2003 to the present. According to the SEC’s complaint filed in the U.S. District Court for the Northern District of Georgia, Gist told customers that he would invest their funds conservatively on their behalves in corporate bonds and other securities. However, according to the SEC Gist invested none of the customer funds, but, instead, used the funds for his personal expenses.

How To Guide: Tips on Avoiding Investment Scams

September 28, 2013 | by Staff Attorney

You read about investment scams, but you never think it can happen to someone like you.

We have all read about the Bernie Madoffs and Allen Stanfords of the world. Unsuspecting investors duped into some of the largest ponzi schemes in the world. You think to yourself that it can never happen to you or anyone you know – that you are too smart. You may be right, but a lot of victims are smart and sophisticated investors. The lure of safe investments with high returns is appealing to everyone. Don’t get caught chasing returns in investments you do not understand.

High Yield and No Risk

The SEC Accused Blake Richards of Stealing $2 Million from Clients

August 20, 2013 | by Staff Attorney

Blake Richards (Richards), a former Georgia representative of LPL Financial (LPL), was charged by the Securities and Exchange Commission (SEC) with defrauding investors and misappropriating $2 million dollars from at least seven clients. According to the complaint filed by the SEC in the Northern District Court of Georgia, Richards directed clients to write checks from retirement accounts or from life insurance policy proceeds in the name of investment businesses he owned, such as “Blake Richards Investments” and “BMO Investments.” However, according to the SEC, his clients’ money was not used for legitimate investing purposes as Richards siphoned off millions for his own personal use.

Richards was a registered representative of LPL from 2009 through May 2013 out of his company, Lanier Wealth Management LLC. According to the SEC’s complaint, Richards used a variety of devices to deceive investors and gain their trust. For instance, Richards is alleged to have created fictitious statements on LPL letterhead in order to continue and conceal his scheme. Richards also gave investors business cards with false professional designations, such as “AAMS”, standing for Accredited Asset Management Specialist, when Richards was not accredited. Finally, Richards even delivered pain medication during a snowstorm to one client’s husband who had been diagnosed with terminal pancreatic cancer in order to gain the client’s trust.

The SEC complaint seeks an order to disgorge Richard’s ill-gotten gains and to free his assets pending further investigation.