Articles Tagged with Kovack Securities

shutterstock_103681238-300x300Advisor Keith Kelt (Kelt), currently employed by Kovack Securities Inc. (Kovack Securities) has been subject to at least two customer complaints during the course of his career.  According to a BrokerCheck report some of the customer complaints concern alternative investments such as direct participation products (DPPs) like 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.

Kelt operates under the d/b/a name TKG Financial, LLC in Santa Barbara, California.  In addition, Kelt has several other disclosed outside business activities including The Kelt Inc. and Kelt Osborne & Co.

In October 2018 a customer complained that Kelt violated the securities laws by alleging that the financial advisor from 2008 until 2016 made unsuitable investments and failed to supervise related to the sale of securities in their accounts. The claim is currently pending.

In September 2017 a customer complained that Kelt violated the securities laws by alleging that the financial advisor made unsuitable investments and was unhappy with her purchase of Hospitality Investors Trust REIT causing $30,000 in damages.  The claim settled for $17,040.

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shutterstock_168737270-300x168According to BrokerCheck records financial advisor Barbara Ralston (Ralston), currently employed by Kovack Securities Inc. (Kovack Securities) has been subject to at least eight customer complaints and one bankruptcy discharge during her career.  According to records kept by The Financial Industry Regulatory Authority (FINRA), the complaints against Ralston concern allegations of unsuitable investments.

In October 2018 a customer complained that Ralston recommended investments that violated the securities laws from 2008 through 2016 by making unsuitable investments and failed to supervise the sale of securities in their accounts.  The complaint is currently pending.

In April 2010 Ralston declared bankruptcy.

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shutterstock_176351714-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) former advisor Judith Bufis (Bufis), formerly associated with Kovack Securities Inc. (Kovack Securities) in East Brunswick, New Jersey has been accused by FINRA over private securities transactions.

In October 2018 Bufis consented to the sanction and to the entry of findings that she failed to provide documents and information requested by FINRA in connection with potential private securities transactions.  In so doing she accepted a bar from the securities industry.

At this time it is unclear the nature or scope of the alleged outside business activities (OBAs) and private securities transactions.  Bufis public disclosures state that she engaged in the sale of insurance and annuities but discloses not other activities.

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shutterstock_190371500-300x200Advisor Andrew Scheirer (Scheirer), currently employed by Kovack Securities, Inc. (Kovack Securities) has been subject to at least four customer complaints.  According to a BrokerCheck report many 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 December 2014, Scheirer’s former employer First Allied Securities Inc. (First Allied) terminated Scheirer alleging that he did not follow the firm’s procedures concerning an arbitration that had been filed by a customer.

In May 2018 a customer filed a complaint alleging unsuitable investment recommendations, misrepresentation, breach of contract, breach of fiduciary duty, and negligence.  The claim alleged $100,001 in damages and settled for $40,000.

In March 2016 a customer filed a complaint alleging that in approximately 2007 the broker recommended various unsuitable private equity products. The claim alleged breach of contract, material omission, fraud, unsuitability, control person liability, and failure to supervise.  The claim alleged $200,000 in damages and settled for $30,000.

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shutterstock_143685652-300x300Our securities fraud attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Douglas Studer (Studer) formerly associated with Kovack Securities Inc. (Kovack) alleging unauthorized trading among other claims.  According to brokercheck records Studer has been subject to two customer complaints, one bankruptcy in 2010, and one regulatory sanction resulting in a permanent bar from the securities industry.

In September 2016 FINRA sanctioned Studer alleging that he consented to the entry of findings that he refused to appear for testimony concerning an investigation into whether he had violated his employing member firm’s policy by being named in an elderly customer’s estate documents to inherit the customer’s waterfront condominium.

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_103476707Our firm is investigating claims made by Castleview Partners, LLC (Castleview Partners) when the firm terminated broker Ralph Fetrow (Fetrow).  According to the firm, Fetrow was discharged in September 2016 after allegation were made that Fetrow violated firm policies and was under investigation for possible violations of firm policies and procedures prohibiting trading away and outside business activities.

According to Fetrow’s brokercheck records Fetrow disclosed outside business activities including Painted Hill Farms, Financial Planning Association, Shippensburg University, RAMS 88 Inc, and Ralph Fetrow Consulting.  At this time it is unclear whether the allegations stem from one of these disclosed entities or another business practice.  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.

Fetrow entered the securities industry in 1999.  From October 2008 through December 2015 Fetrow was associated with Invest Financial Corporation.  Since February 2016, Fetrow has been registered with Kovack Securities Inc. out of the firm’s Lemoyne, Pennsylvania office location.

shutterstock_183010823The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Stanley Keyes (Keyes). According to BrokerCheck records Keyes is subject to 5 customer complaints, 1 regulatory action, and 2 employment separations. The customer complaints against Keyes allege securities law violations that including unsuitable investments, unauthorized trading, misrepresentations, and breach of fiduciary duty among other claims.

The most recent regulatory action was filed by FINRA in November 2010 and alleged that Keyes borrowed a total of $214,000 from customers and used that money to meet personal financial obligations. FINRA alleged that Keyes failed to disclose the existence of these loans to his firm. FINRA fined Keyes $5,000 and suspended the broker for three months. Prior to that FSC Securities Corporation terminated Keyes alleging that the broker had borrowed money from firm customers in violation of the firm’s policies.

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_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.

shutterstock_103610648As recently reported in Reuters, Atlas Energy LP has marketed itself to investors as a way to get into the U.S. energy boom. By contributing at least $25,000 in a private placement partnership that will drill for oil and gas in states such as Texas, Ohio, Oklahoma and Pennsylvania and share in revenues generated from the wells. 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 sounds good when pitched: participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of fossil fuels into potentially viable prospects and to boot Atlas will invest up to $145 million of its own capital alongside investors. Through this method and similar deals, oil and gas projects have issued nearly 4,000 private placements since 2008 seeking to raise as much as $122 billion.

But before you take the plunge a review of the Atlas’s offering memorandum reveals some red flags and given Atlas’ past failure rate investors should think twice. First, up to $45 million of the money raised will be paid to Atlas affiliate Anthem Securities that will then be turned over to as commissions to broker-dealers who pitch the deal to investors. Up to $39 million more will be used to buy drilling leases from another affiliate. Think investors will get a fair price on the leases when Atlas controls both sides of the deal? More conflicts ahead as Atlas affiliated suppliers may also get up to $53 million for buying drilling and transport equipment. Next, an additional $8 million of Atlas’s investment is a 15 percent markup on estimated equipment costs. Finally, Atlas will pay itself nearly $52 million in various other fees and markups.

In sum, at least 40% of Atlas’s $145 million investment alongside mom and pop goes right back to the company. In addition, Atlas’ profits don’t stop there, when the venture starts generating revenue Atlas is entitled to 33% before accounting for those payments and markups. In the end, not much of a risk at all for Atlas.

shutterstock_54385804The Financial Industry Regulatory Authority (FINRA) brought a complaint against broker Anthony Diaz (Diaz) concerning a host of industry violations. Diaz entered the securities industry in January 2000 and has been registered with eleven different firms over fourteen years. Diaz is currently employed by IBN Financial Services, Inc., (IBN Financial) since September 2012.

Diaz has a long and troubled history of securities related violations and misconduct. There have been at least 14 customer complaints filed against Diaz, he has been subject to 5 firm terminations, and has two judgments. FINRA also found that Diaz was fired or permitted to resign by six of the eleven member firms with which he was registered for. On or about November 21, 2002, Edward Jones fired Diaz for providing inaccurate information during a supervisory review, was terminated by Raymond James Financial Services, Inc. because it was “no longer comfortable supervising”, was permitted to resign on April 1, 2009, by First Allied Securities, Inc. because he had a history of customer complaints and administrative infractions., was fired by SII Investments, Inc. for unauthorized trading, was fired by Kovack Securities, Inc. because of complaints alleging unauthorized trades, and finally was fired by Sandlapper Securities, LLC for soliciting sales of variable annuities without being properly appointed by the issuing company.

FINRA alleged that from March 2010, through May 2011, Diaz induced approximately eighty customers to enter into variable annuity exchanges causing significant surrender charges without a reasonable basis for recommending these exchanges. FINRA found that each customer invested in the same fund, had the same subaccount allocation, and had the same rider selected. FINRA alleged that Diaz recommended the annuity exchanges without having an understanding of the features of the new product and used the same three invalid justifications for nearly all of these exchanges.