Articles Tagged with SagePoint Financial

shutterstock_27786601The securities lawyers of Gana Weinstein LLP are investigating a customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Bruce Slater (Slater).  According to BrokerCheck records Slater has been subject to at least four customer complaints.  The customer complaints against Slater alleges securities law violations that including unsuitable investments and misrepresentations among other claims.   Many of the complaints involve direct participation products (DPPs) and private placements including oil and gas partnerships – including Ridgewood Energy-, non-traded real estate investment trusts (REITs), variable annuities, and other alternative investments.

Our firm has represented many clients in these types of products.  All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds.  For example, products like oil and gas partnerships, REITs, and other alternative investments are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products, if they can be redeemed.  However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them.  Further, investor often fail to understand that they have lost money until 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.

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shutterstock_156562427The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Charles Geraci (Geraci). According to BrokerCheck records Geraci is subject to six customer complaints. The customer complaints against Geraci allege securities law violations that including unsuitable investments, breach of fiduciary duty, fraud, misrepresentations, and negligence among other claims.   Most of the claims appear to largely relate to allegations regarding the inappropriate sale of direct participation products such as limited partnerships, equipment leasing, oil & gas investments, and non-traded real estate investment trusts (Non-Traded REITs) and also variable annuities. The complaints specify certain oil & gas programs and United Mortgage Trust (UMT).

Our firm has represented many clients in these types of products. All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. For example, products like Non-Traded REITs, equipment leasing, variable annuities, and oil & gas private placements are only appropriate for a narrow band of investors under certain conditions due to the high costs, illiquidity, and huge redemption charges of the products. However, due to the high commissions brokers earn on these products they sell them to investors who cannot profit from them. Further, investor often fail to understand that they have lost money until 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.

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.

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shutterstock_145368937The investment attorneys of Gana Weinstein LLP are interested in speaking with clients of Scott Aabel (Aabel). According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) Aabel has been the subject of at least 10 customer complaints, one regulatory event, three judgment or liens, and three financial disclosures. The customer complaints against Aabel allege securities law violations that claim unsuitable investments and misrepresentations among other claims involving mostly variable annuity products.

In June 2009, a customer filed a complaint alleging $71,873 in damages stemming from a loss of a living benefit rider for an annuity contract. In September 2007, a customer complained that the performance and fees for a variable annuity were misrepresented to the customer leading to losses of $13,595.

Also in April 2012, the Florida Office of Financial Regulation Division of Securities filed an administrative complaint against Aabel alleging violations of the state’s code and imposed a fine of $70,000.

In addition, there are three liens filed against Aabel. In July 2013, a $45,287 tax lien was imposed. In September 2012, Aabel received a $88,850 tax lien. Also in September 2012, another $203,045 tax lien was imposed against Aabel. A broker with large liens are an important consideration for investors to consider when dealing with a financial advisor. An advisor may be conflicted to offer high commission investments to customers in order to satisfy liens and debts that may not be in the client’s best interests.

Aabel entered the securities industry in 1991. From May 1991, until April 2013, Aabel was associated with Prime Capital Services, Inc. Since March 2013, Aabel has been associated with SagePoint Financial, Inc. out of the firm’s Nokomis, Florida branch office location.

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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.

In fact, of the 28 people interviewed by Reuters who invested in deals from Atlas, Reef Oil & Gas Partners, Discovery Resources & Development LLC, and Black Diamond Energy Inc. 17 were retirees who had low tax burdens when the product was recommended to them.

By now you may be asking, how do these deals even get issued? First, the private placement market is very opaque. Issuers are only required to file a statement to exempt the security from registration and a few other details about the investment. Second, investors rely upon the brokerage industry’s due diligence on each issue they sell to ensure its suitability for investors. But many brokers use outside due-diligence firms that may be paid by the issuer, a conflict of interest, when evaluating deals. Indeed, some of the largest securities frauds in the private placement space have been the result of reliance on third-party due diligence.

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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.

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shutterstock_175000886The law offices of Gana Weinstein LLP are investigating a series of claims before The Financial Industry Regulatory Authority (FINRA) in relation to the conduct of financial advisor Robert Smith (Smith). Smith has been accused by at least 10 customers over his career concerning allegations that Smith overconcentrated the customer’s accounts in private placement securities including equipment leasing programs, oil & gas investments, and non-traded real estate investment trusts (Non-traded REITs).

Smith has been registered with several broker dealers over the years. Starting in 2000 Smith was registered with American General Securities (n/k/a SagePoint Financial, Inc.) until May 2006. Thereafter, Smith was associated with ProEquities, Inc. until June 2010. Finally, from June 2010, until June 2014, Smith was registered with Berthel, Fisher & Company Financial Services, Inc. (Berthel Fisher). Currently, Smith is not registered with any FINRA firm. Upon information and belief, from 2006 on Smith operated his securities business under a DBA called Proactive Retirement Investing.

The large number of complaints against Smith concerning the same or similar charges of misconduct is unusual in the brokerage industry. Most brokers go their entire careers without a single complaint. A small number have one or two complaints. But only a tiny percentage have more than two customer complaints. Here, at least 10 customers have made allegations against Smith all concerning difficult to value private placement securities.

The types of products Smith recommended do immediately appear to be inappropriate to the investor. In oil & gas, Non-Traded REIT, and equipment leasing programs the investor often receives a stream of income for a number of years, maybe as much as 5 to 7 years before something goes wrong. All of sudden the income stops or the interest payments are lowered substantially. Only then does the investor learn that product is not expected to return the investor’s principal for a variety of reasons depending upon the product. These income paying securities lull investors into a false sense of security because they initially receive a stream of income and belief the investments are viable.

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