Articles Tagged with investment fraud

shutterstock_20354401-300x200Our securities fraud attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Bryon Glime (Glime) formerly associated with Capital Investment Group, Inc. (Capital Investment) alleging unsuitable investments and unauthorized trading among other claims.  According to brokercheck records Glime has been subject to three customer complaints, one criminal matter, three judgments or liens, one employment termination for cause, and one regulator action.

In September 2015 Glime was terminated by Capital Investment after the firm alleged that Glime failed to timely report a criminal disclosure to the firm.  The criminal disclosure disclosed includes allegations of theft, embezzlement, and misappropriation.

Brokers in the financial industry have the fundamental responsibility to treat investors fairly.  This obligation includes making only suitable investments for their client.  The suitable analysis has certain requirements that must be met before the recommendation is made.  First, there must be reasonable basis for the recommendation for the investment based upon the broker’s and the firm’s investigation and due diligence.  Common due diligence looks into the investment’s properties including its benefits, risks, tax consequences, the issuer, the likelihood of success or failure of the investment, and other relevant factors.  Second, if there is a reasonable basis to recommend the product to investors the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives.  These factors include the client’s age, investment experience, retirement status, long or short term goals, tax status, or any other relevant factor.

shutterstock_177577832-300x300According to records kept by The Financial Industry Regulatory Authority’s (FINRA) customers have filed complaints against broker Mark Miranda (Miranda).  Our attorneys have been reviewing records that Miranda has been the subject of at least seven customer complaints, one bankruptcy filing, and one tax lien in September 2012 for $39,000.  The customer complaints against Miranda allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading and churning (excessive trading) among other claims.

The most recent complaint was filed in September 2016 and unsuitable investments causing $49,797.17 in damages.  The complaint is currently pending.  In April 2016 another investor filed a complaint and alleged excessive fees causing $47,620 in damages.  The complaint is currently pending.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time.  Often times the account will completely “turnover” every month with different securities.  This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.  Churning is considered a species of securities fraud.  The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions.  A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements.  Certain commonly used measures and ratios used to determine churning help evaluate a churning claim.  These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

shutterstock_187532303-300x200Our firm is investigating claims made by The Financial Industry Regulatory Authority (FINRA) against broker Adam Estes (Estes).  According to the FINRA action, Estes consented to the sanctions and findings that he participated in private securities transactions totaling over $1.2 million without providing prior written notice his brokerage firm – J.J.B. Hilliard – nor sought the firm’s permission to participate in several businesses.  According to FINRA, Estes also engaged in outside businesses which were formed by him and others without providing prior written notice to the firm.  FINRA also alleged that Estes made misrepresentations and omissions concerning the private securities transactions and outside business activities in firm annual questionnaires and other compliance documents.

The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  Often times brokers who engage in this practice use outside businesses in order to market their securities.

Estes entered the securities industry in 2000.  Since February 2000 Estes was registered with J.J.B. Hilliard out of the firm’s Bloomington, Indiana office location.

shutterstock_184920014-300x199Our firm is investigating claims made by Stifel, Nicolaus & Company, Incorporated (Stifel Nicolaus) when the firm terminated broker Jon Schmidhammer (Schmidhammer).  According to the firm, Schmidhammer was discharged in July 2016 after allegation were made that Schmidhammer resigned after his arrest for allegedly stealing money from a client.

According to Schmidhammer’s brokercheck records Schmidhammer has no disclosed outside business activities.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  Often times brokers who engage in this practice use outside businesses in order to market their securities.

In October 2016 a customer filed a complaint alleging that Schmidhammer engaged in unsuitable management of their accounts, unauthorized trading, breach of fiduciary duty, and conversion.  The complaint alleges damages of $500,000.  The claim is currently pending.

shutterstock_183525509-300x200The securities fraud attorneys at Gana Weinstein LLP have recently filed a complaint on behalf of a client alleging that Dean Mustaphalli (Mustaphalli) engaged in securities fraud.  The claim was brought against brokerage firms Sterne Agee Financial Services, Inc. (Sterne Agee) and Interactive Brokers LLC (Interactive Brokers) alleging that the firms failed to supervise Mustaphalli’s misconduct.

The complaint alleges that starting in December 2009, Mustaphalli established a securities related outside business activity (OBA) in the form an advisory firm and a hedge fund.  Mustaphalli registered the investment advisor with the SEC under the name Mustaphalli Advisory Group, LLC (MAG) until December 2014.  Subsequently, Mustaphalli filed a From D with the SEC in January 2011 for a hedge fund called Mustaphalli Capital Partners Fund, L.P. (MCPF) and opened an account for the fund.

The complaint alleged that Mustaphalli failed to inform Sterne Agee of his transactions through MCPF although Mustaphalli did disclose the MAG RIA.  The complaint also alleges that in or around mid-2014 Mustaphalli transferred MAG’s accounts and the MCPF account to Interactive Brokers.  Also around May 2013 FINRA began investigating Mustaphalli’s, MAG’s, and MCPF’s activities.  In December 2014, FINRA suspended Mustaphalli for two years and imposed a fine and disgorgement for engaging in private securities transactions through MCPF without notifying Sterne Agee.  Dep’t of Enforcement v. Dean Mustaphalli, AWC No.  2013036880302 (Dec. 15, 2014).

shutterstock_52426963The securities lawyers of Gana Weinstein LLP are investigating a customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Rabinder “Ravi” Deshmukh (Deshmukh).  According to BrokerCheck records Deshmukh has been subject to at least four customer complaints.  The customer complaints against Deshmukh allege securities law violations that including unsuitable investments and excessive margin among other claims.

The most recent claim was filed in June March 2016 and alleges that from 2008 to 2015, the customer was recommended and sold unsuitable, highly concentrated positions in speculative securities. In addition, the customer also alleged that they were recommended to trade on margin and seek compensatory and punitive damages in the amount of $9 million.  The complaint is currently pending.

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_145368937The investment fraud lawyers of Gana Weinstein LLP are investigating the employment termination filed with The Financial Industry Regulatory Authority (FINRA) by Woodbury Financial Services, Inc. (Woodbury Financial) involving broker David Ross (Ross). According to BrokerCheck records Ross is subject to one customer complaint, one employment separation for cause, and six judgment or liens.

According to Woodbury Financial, the firm terminated Ross after alleging Ross failed to disclose an outside business activity (OBA) and accepted loans form a client in addition to violating other firm policies and procedures.  Often times such filings indicate that the broker is engaging potentially in private securities transactions, promissory notes, or loans away from the firm.  The providing of loans or selling of notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.

At this time it unclear the scope of Ross’ OBAs and/or private securities transactions.  According to brokercheck records Ross has disclosed OBAs listed as including Ross Financial Planning, Inc., Belmont University, and First Shot Foundation.  Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate brokers, or insurance agents to clients of those side practices.

shutterstock_184149845The Securities and Exchange Commission (SEC) announced that ICON Capital LLC, an entity that manages equipment leasing funds, agreed to settle charges that it caused four of its funds to report materially inaccurate financial results in their SEC filings and pay a $750,000 penalty.

Our firm has represented many clients in equipment leasing products like LEAF and ICON.  All of these investments come with high costs that do not compensate investors for the extreme risk being taken.  Equipment leasing funds historically underperform even safe benchmarks, like U.S. treasury bonds.  Investors are destined to lose money in equipment leasing programs like LEAF Equipment Leasing Income Funds I-IV and ICON Leasing Funds Eleven and Twelve.  The high costs and fees associated with these investments make significant returns virtual impossibility.  Further, investor often fail to understand that they have lost money under many years after agreeing to the investment.  In sum, for all of their costs and risks, investors in these programs are in no way additionally compensated for the loss of liquidity, risks, or cost.

On top of these high risks, the SEC has now found that the funds’ opaque nature has allowed the funds to hide more investor losses.  According to the SEC’s order instituting a settled administrative proceeding, the four funds’ financial results were misstated due to accounting errors relating to the impairment of assets and that ICON failed to comply with Generally Accepted Accounting Principles (GAAP) on multiple occasions.

shutterstock_133513469The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker John Tinnelly (Tinnelly).  According to BrokerCheck records Tinnelly has been the subject of at least ten customer complaints and one regulatory action.  The customer complaints against Tinnelly allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

The most recent complaint was filed in April 2015 and alleged churning, unsuitable investments, unauthorized trading, breach of contract from July 2010 until November 2012 causing $168,924 in damages.  The complaint settled with no contribution by the broker.  In March 2015, another customer complaint alleged churning, unsuitable investments, unauthorized trading, breach of contract from February 2010 until March 2011 causing $118,375 in damages.  The complaint is currently pending.

When brokers engage in excessive trading, sometimes referred to as churning, the broker will typical trade in and out of securities, sometimes even the same stock, many times over a short period of time.  Often times the account will completely “turnover” every month with different securities.  This type of investment trading activity in the client’s account serves no reasonable purpose for the investor and is engaged in only to profit the broker through the generation of commissions created by the trades.  Churning is considered a species of securities fraud.  The elements of the claim are excessive transactions of securities, broker control over the account, and intent to defraud the investor by obtaining unlawful commissions.  A similar claim, excessive trading, under FINRA’s suitability rule involves just the first two elements.  Certain commonly used measures and ratios used to determine churning help evaluate a churning claim.  These ratios look at how frequently the account is turned over plus whether or not the expenses incurred in the account made it unreasonable that the investor could reasonably profit from the activity.

shutterstock_20002264The investment lawyers of Gana Weinstein LLP are investigating the regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Brian Smit (Smit) formerly working out of the Sioux Falls, South Dakota office of LPL Financial LLC (LPL).  LPL terminated Smit in August 2015 stating that the broker engaged in unapproved investments.  Thereafter, in March 2016, FINRA barred Smit stating that Smit consented to the sanction and to the entry of findings that he refused to appear for on-the-record testimony requested by FINRA related to the alleged participation in unapproved private securities transaction.

The providing of loans or selling of promissory notes and other investments outside of a brokerage firm constitutes impermissible private securities transactions – a practice known in the industry as “selling away”.  At this time it unclear the nature and scope of Smit’s outside business activities and private securities transactions.  However, according to Smit’s public records his outside business activities include Pinnacle Wealth Management and Smit Holdings, LLC – a rental real estate business.  Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, real estate agents, or insurance agents to clients of those side practices.

Smit entered the securities industry in 2010.  From Aprill 2010 until August 2015, Smit was associated with LPL.

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