Articles Tagged with investment advisor fraud

shutterstock_143094109-300x200The attorneys at Gana Weinstein LLP are reviewing court documents and complaints related to The Securities and Exchange Commission’s (SEC) charge  a Connecticut investment advisory firm Temenos Advisory, Inc. (Temenos) and its principal, George L. Taylor (Taylor) put $19 million of investor money, including elderly investors’ retirement savings and pension plans, in risky investments and all the while secretly pocketing large commissions.

The SEC alleged that from 2014 through 2017, Temenos and Taylor defrauded their advisory clients and by steering the clients into unsuitable investments and by hiding commissions and other financial incentives that Temenos and Taylor were pocketing on top of the advisory fees clients paid. In addition, the SEC found that Temenos and Taylor repeatedly downplayed and concealed risks, and overstated potential gains with the illiquid private placements

The SEC accused Temenos and Taylor of violating their fiduciary duty that every investment adviser owes to its clients that requires firms to put client interests first, to deal with clients with the utmost honesty, to disclose all conflicts or potential conflicts of interest, and to use reasonable care in providing investment advice.

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shutterstock_92699377-300x285The investment fraud attorneys at Gana Weinstein LLP have been investigating previously registered broker Sanders Spangler (Spangler). According to BrokerCheck Records kept by the Financial Industry Regulative Authority (FINRA), In February 2017, LPL Financial LLC (LPL Financial) terminated Spangler for executing unauthorized trades in non-discretionary customer accounts. Shortly after, in March 2018, FINRA barred Spangler from financial industry due to Spangler’s failure to appear to an on-the-record testimony regarding the unauthorized trade allegations against Spangler at LPL Financial. By failing to appear to the testimony, Spangler was in violation of FINRA Rules 8210 and 2010. Without admitting or denying the findings, Spangler consented to the sanction and to the entry of findings. However, the extent of which Spangler executed unauthorized trades is still unclear.

Spangler has also been subject to six customer disputes within the past two years.  Two of these disputes are still pending.

In March 2018, Spangler’s ex-wife alleged that Spangler was forging her account documents. This dispute is currently still pending.

shutterstock_156764942-200x300The securities attorneys at Gana Weinstein LLP are investigating claims against UBS Financial Services Inc. (UBS Financial) broker Samuel Rankin (Rankin). According to BrokerCheck records, Rankin has been subject to eight customer complaints, two of which are still pending. The majority of these complaints concern the misallocation of customers’ funds into unsuitable investments.

Most recently, in September 2017, a customer alleged that from 2015 to 2016, Rankin misallocated funds into highly risky investments which were unsuitable to the customer’s needs.  The customer is requesting $849,221 for damages. This dispute is still pending.

In August 2017, a customer alleged that from 2009 to 2017, Rankin misallocated retirement funds into aggressive investments that were unsuitable to the customers’ needs and violated their written agreement to placement in only moderate-risk investments. This dispute is still pending.

shutterstock_177792281The securities fraud lawyers of Gana Weinstein LLP are investigating a regulatory complaint (Disciplinary No. 2015043159501) filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Kevin Murphy (Murphy). FINRA alleged that in or about November 2013, Murphy sold $1.2 million of shares and warrants in a private placement to four individuals and one limited partnership without his firm’s knowledge.

According to FINRA, in August and September, 2013, Murphy made a $1.2 million investment in a private placement for which TGP Securities, Inc. (TGP), Murphy’s brokerage firm, was providing brokerage services. In return for his investment, FINRA found that Murphy received two stock certificates totaling 600,000 Series F shares and two warrants exercisable for 300,000 common shares. On November 29, 2013, FINRA alleged that Murphy resold the Series F shares and the warrants to four individuals and one limited partnership for $1.2 million without the permission of TGP.

In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

shutterstock_128856874The securities fraud lawyers of Gana Weinstein LLP are investigating a regulatory complaint (Disciplinary No. 1013038289101) filed with The Financial Industry Regulatory Authority’s (FINRA) against broker James Nixon (Nixon). FINRA alleged that Nixon failed to provide prior written notice to Bridge Capital Associates, Inc. (Bridge Capital), his then employing brokerage firm, before selling $600,000 of convertible promissory notes – practice referred to as “selling away” in the industry. FINRA found that Nixon provided detailed written notice to Bridge Capital only after he had already disseminated investor presentations to approximately 40 potential investors and completed sales to three accredited investor. In addition, FINRA alleged that Nixon provided investor presentations that contained exaggerated and misleading statements about the issuer of the promissory notes, by the initials BRT, and failed to include a meaningful risk disclosure.

Nixon entered the securities industry in 1987. Nixon was registered with Bridge Capital Associates since December 2007 until September 2013, when Bridge Capital discharged Nixon in connection with the conduct concerning FINRA’s allegations. Shortly after Bridge Capital terminated his registrations Nixon became registered with a different firm, Source Capital Group, Inc. out of the firm’s Westport, Connecticut office location.

FINRA found that the promissory notes were offered without a PPM and that instead the notes were offered through an investor PowerPoint presentation that Nixon prepared in conjunction with the issuer. FINRA found that the investor presentation was devoid of any cautionary language specific to the promissory notes and that the prospects for notes were presented in very optimistic terms and stated financial projections at aggressive multiples without sources or support for such representations. FINRA found these representations to violate its communications rules.

shutterstock_43547368The securities fraud lawyers of Gana Weinstein LLP are investigating the regulatory action filed (Disciplinary Action No. 2014043025701) by The Financial Industry Regulatory Authority’s (FINRA) against broker Carlos Benavidez Jr (Benavidez). According to the allegations, between January 2013 and January 2015, Benavidez exercised discretion in 80 customer accounts without obtaining prior written authorization from the customers while with brokerage firm Waddell & Reed.

FINRA found that beginning in or about December 2009, Benavidez and two other representatives registered with Waddell & Reed, formed RBR Group and shared a customer base for their securities business. Between January 2013 and January 2015, FINRA found that Benavidez exercised discretion in effecting hundreds of securities transactions in approximately 80 customer accounts without obtaining written authorization from his customers or Waddell & Reed’s approval.

Also according to FINRA, Benavidez tried to hide the evidence of unauthorized trading by falsifying documents. FINRA found that on or about September 9, 2014, Benavidez and another individual with the firm backdated approximately 26 customer notes that had been created in the firm’s computer program in order to falsely reflect that Benavidez or another member of the RBR Group had conversed with those customers on before the trades were effected when, in fact, it was not until six days later when Benavidez or another individual talked with the 26 customers about the trades that had been effected in their accounts.

shutterstock_145368937The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Paul Blum (Blum). According to BrokerCheck records Blum has been the subject of at least eight customer complaints three of which have been filed since 2015. The customer complaints against Blum allege a number of securities law violations including that the broker made unsuitable investments, and excessive trading among other claims.

The most recent customer complaint filed in December 2015 and alleged negligence in recommending the purchase of bonds that defaulted from February 2009 until April 2014 claiming $450,000 in damages. The claim is still pending. In November 2015, another client filed a complaint alleging Blum invested in high yield bonds without consultation between May 2013 and May 2014 resulting in $133,000 in damages. The dispute is currently pending.   In a third complaint filed in November 2015, an investor claimed that Blum invested in appropriate bonds from 2005 through 2015 causing $140,000 in damages. The claim was settled.

Brokers have a responsibility treat investors fairly which includes obligations such as making only suitable investments for the client. In order to make a suitable recommendation the broker must meet certain requirements. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

shutterstock_26813263The investment attorneys of Gana Weinstein LLP have been contacted by a growing number of investors who hold non-purpose loans secured by their brokerage accounts and then suffered staggering investment losses that have jeopardized their ability to repay the loan. In recent years all the major wire houses have begun recommending that their wealthier clients take out securities-backed lines of credit (SBLOCs). These loans that are often marketed by brokerage firms to investors as an easy way to cash out your securities accounts by borrowing against the assets in your portfolio without actually having to liquidate securities.

These lines of credit allow investors to borrow money using securities held in the investment accounts as collateral and allow the investor to continue to trade securities in the pledged accounts. An SBLOC requires typically requires monthly interest-only payments until repaid. Thus, when an investor losses a significant amount of their portfolio the investor has made very little progress in repaying the loan and may have few to no options to pay the loan back.

According to Fortune, securities lending is Wall Street’s hottest new business. According to the article brokerage firms such as UBS, Bank of America, Merrill Lynch, Morgan Stanley, Wells Fargo, and JP Morgan are recommending that their high net worth investors take out loans against their brokerage accounts at an alarming rate. The Wall Street Journal reported that securities based loans increased by 28% at UBS between 2011 and 2013. According to Fortune, a Wells Fargo advisor told the writer that the loans are so lucrative for the brokers that they refer to the money they make as their 13th production month. Another contact with Morgan Stanley reported that a regional manager would like to automatically send paperwork for loans with every single new account form.

shutterstock_156562427The investment attorneys of Gana Weinstein LLP are investigating regulatory complaints filed by The Financial Industry Regulatory Authority’s (FINRA) against brokerage firm Finance 500, Inc. (Finance 500) and its employees including William Watson, Robert Hicks, Geoffrey Schiffrin, Paul Savage (Disciplinary Proceedings Nos. 2013038091902, 2013036837802). The complaints largely focus on allegations that the firm failed to supervise the issuance, sales, and trading of various low-priced securities or penny stocks.

According to one of the complaints, FINRA alleged that Finance 500 raised millions for four different penny stock issuers. FINRA alleged that from June 2012 to June 2014 Finance 500 failed to enforce a reasonable supervisory system to review and monitor sales of private placements by its investment banking department in the areas of due diligence, suitability, and marketing materials provided to customers. In addition, FINRA alleged that from March 2013 through June 2014, the firm used or permitted issuers to use, private placement marketing materials that were not fair and balanced and made misleading unsupported statements.

While FINRA’s investigation focused on many areas of securities issuance, one area focused on was the firm’s suitability procedures for private placements which were found to be not reasonable. FINRA stated that Finance 500 did not have an adequate procedures regarding how it would collect the suitability documents from each customer and in some cases the documents that it did collect were incomplete and did not include all requested information. In addition, FINRA found that the firm lacked procedures regarding how and when supervisory approval would be given for a particular customer and at times allowed its supervisory system to be evaded by permitting customers solicited by the firm’s registered representatives to make investments directly with the issuer.

shutterstock_191231699The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Marcious Dickerson (Dickerson). According to BrokerCheck records Dickerson has been the subject of 3 customer complaints. The customer complaints against Dickerson allege securities law violations that including unsuitable investments, misrepresentations, and breach of fiduciary duty among other claims.   Many of the most recent claims involve allegations concerning non traded real estate investment trusts (Non-Traded REITs).

As a background since the mid-2000s Non-Traded REITs became one of Wall Street’s hottest products. However, the failure of Non-Traded REITs to perform as well as their publicly traded counterparts has called into question if Non-Traded REITs should be sold at all and if so should there be a limit on the amount a broker can recommend. See Controversy Over Non-Traded REITs: Should These Products Be Sold to Investors? Part I

Non-Traded REITs are securities that invest in different types of real estate assets such as commercial, residential, or other specialty niche real estate markets such as strip malls, hotels, storage, and other industries. Non-traded REITs are sold only through broker-dealers, are illiquid, have no or limited secondary market and redemption options, and can only be liquidated on terms dictated by the issuer, which may be changed at any time and without prior warning.