securities attorney

Broker Investigation: NFP Advisor Services Broker Kevin Ellman

September 4, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Kevin Ellman (Ellman) has been the subject of at least four customer complaints and one regulatory action. The customer complaints against Ellman allege in one of the complaints that the broker made misrepresentations related to the sale of auction rate securities. In another complaint, the customer alleged negligence in connection with a mezzanine financing investment. In a third complaint, the customer alleged that Ellman made unsuitable investment recommendations.

Ellman entered the securities industry in 1991. From January 2006 onward Ellman has been registered with NFP Advisor Services, LLC (NFP Advisor).

Advisers have an obligation to deal fairly with investors and that obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.

FINRA Bars Former LPL Financial Broker Thomas Caniford From the Industry

September 4, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) barred former LPL Financial LLC (LPL) broker Thomas Caniford (Caniford) after the broker failed to respond to a letter from the regulator requesting information. While BrokerCheck records kept by FINRA do not disclose the nature of the regulatory inquiry, in February 2015, Caniford was terminated by LPL for cause stating that the broker was terminated for 1) having custody and control of client funds in a bank account in violation of firm policy; and 2) failure to provide bank records requested by the firm.

In addition, Caniford has been the subject of at least two customer complaints and four financial liens all tax related. The customer complaints against Caniford allege a number of securities law violations including that the broker made investments in products not approved by LPL, also referred to as “selling away”, and direct theft and misappropriation of funds.

Caniford entered the securities industry in 1982. From March 2004, until March 2008, Caniford was associated with M Holdings Securities, Inc. Thereafter, from March 2008, until his termination in March 2015, Caniford was associated with LPL.

FINRA Bars Merrill Lynch Broker Kai Cheng Over Unauthorized Trading Investigation

September 2, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) barred (Case No. 201303930510) broker Kai Cheng (Cheng) concerning the broker’s failure to respond to requests for information concerning the regulators investigation into claims that Cheng engaged in conduct including entering into personal financial transactions with a customer, using a personal email address to communicate with a customer, and unauthorized trading in a customer account. In addition, to the FINRA bar Cheng has one employment separation and one customer dispute disclosed on his BrokerCheck record. The customer complaint contains allegations of unsuitable investments, failure to follow instructions, unauthorized trading, and omissions of material facts.

Cheng first entered the securities industry in 2005 as a broker with Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) with the title of “First Vice President” and worked there until he was discharged in 2015. On March 2, 2015, Merrill Lynch filed a Uniform Termination Notice (Form U5) that reflected that Cheng was discharged on February 4, 2015. According to FINRA the Form U5 stated that Cheng was terminated for conduct including entering into personal financial transactions with a customer, using a personal email address to communicate with a customer and unauthorized trading in a customer account.

FINRA then sought to investigate these allegations and during the course of FINRA’s examination, the agency sent a letter to Cheng’s counsel pursuant to FINRA Rule 8210 requesting Respondent to provide on the record testimony. According to FINRA Cheng failed to provide testimony. Cheng’s failure to appear resulted in a bar from the industry.

FINRA Sanctions Tyler Powell Over Unauthorized Trades

September 1, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned (Case No. 2014040633301) broker Tyler Powell (Powell) concerning allegations that Powell exercised discretion in a customer’s account without obtaining prior written authorization from the customer.

Powell first became registered with FINRA in 2007 through his association with a A.G. Edwards & Sons, Inc. From January 2008, to August 2014, he was associated with Wells Fargo Advisors, LLC (Wells Fargo) and registered with FINRA. Since August 2014, Powell has been associated with Stifel, Nicolaus & Company, Incorporated (Stifel Nicolaus).

NASD Conduct Rule 2510(b) prohibits registered representatives from exercising discretion in a customer account unless the customer has provided written authorization to the broker and the brokerage firm to exercise discretion. Advisors are not allowed to engage in unauthorized trading. Such trading occurs when a broker sells securities without the prior authority from the investor. A broker must first discuss all trades with the investor before executing them. The SEC has also found that unauthorized trading to be fraudulent nature.

Broker Investigation: Aegis Capital Advisor Damian Mamane

September 1, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Damian Mamane (Mamane) has been the subject of at least one customer complaint. The customer complaint against Mamane alleges that the broker made unsuitable investments in equity and penny stock securities.

Mamane entered the securities industry in 2001. From September 2009, until April 2014, Mamane was registered with IAA Financial LLC. Since March 2014, Mamane has been associated with Aegis Capital Corp.

Advisers have an obligation to deal fairly with investors and that obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.

Massachusetts Files Complaints Against Securities American and Its Broker Barry Armstrong

August 31, 2015 | by Staff Attorney

The Massachusetts Office of the Secretary of Securities Division filed complaints against brokerage firm Securities America, Inc. (Securities America) and one of its financial advisors Barry Armstrong (Armstrong) concerning allegations that in 2014, Securities America authorized Armstrong to run a deceptive AM radio advertising campaign. According to the complaint, the advertising campaign was designed to target vulnerable Massachusetts senior citizens by trumpeting the looming dangers of Alzheimer’s disease and implying that the brokerage firm has special access to medical information and support.

Massachusetts found that the advertising campaign was a classic “bait and switch” in which callers inquired about Alzheimer’s support and information and instead were solicited solely for brokerage and financial planning services. Massachusetts found that advertising used alarmist language designed to pull in senior citizens with concerns about Alzheimer’s disease while failing to disclose the nature of the services Armstrong actually offers. Indeed, when callers contact the number provided the only information concerning Alzheimer’s that is provided is a Fact Sheet published by the National Institute of the Aging and some other publicly available free information about Alzheimer’s.

Massachusetts found Securities America’s approval of the advertising used “astounding” stating that as a national-scale broker-dealer the firm failed to make “substantive comment or follow up of any kind” when reviewing Armstrong’s advertising materials. In sum, Massachusetts alleged that “Securities America failed to prevent or even flag glaringly unethical conduct.”

Broker Spotlight: TIC Customer Complaints Against Mark Kosanke

August 26, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Mark Kosanke (Kosanke) has been the subject of at least two customer complaints. The customer complaints against Kosanke allege a number of securities law violations including that the broker made unsuitable investments and misrepresentations and false statements among other claims. The securities involved in the customer disputes are tenants-in-common (TICs).

Kosanke entered the securities industry in 1994. From 2000, until July 2006, Kosanke was registered with Questar Capital Corporation. From July 2006, until August 2010, Kosanke was associated with Professional Asset Management, Inc. Thereafter, from August 2010, Kosanke was registered with brokerage firm Concorde Investment Services, LLC.

As a background, TICs largely been sold unfairly as tax advantaged products that allow customers to defer capital gains taxes on appreciated real estate. TICs are private placements that have no secondary trading market and are therefore illiquid investments. In a typical TIC, the investor receives a fractional interest in the property along with other stakeholders and the profits are generated mostly through the efforts of the sponsor and the management company that manages and leases the property. The sponsor typically structures the TIC investment with up-front fees and expenses charged to the TIC and negotiates the sale price and loan for the acquired property. Because these fees are often higher than 15%, there is often no way for the investment to be profitable for the investor.

Voya Financial Advisors to Stop Selling L Share Annuities Over Suitability Concerns

August 19, 2015 | by Staff Attorney

InvestmentNews has reported that brokerage firm Voya Financial Advisors (Voya) changed its variable annuity selling policies by restricting the sale of contracts known as “L share” annuity contracts if the contract include riders. The change comes due to increasing pressure from regulators concerned about the products’ suitability for investors. The firm has 2,200 brokers that would be effected by the new policy.

Voya stated in the article that “We feel strongly that it is in the best interests of our advisers and their clients to make this change to Voya Financial Advisors’ suitability policy.” The firm stated that the product has been scraped “in order to best serve the retirement readiness and long-term planning needs of our customers.”

L-shares charged higher ongoing fees in exchange for a shorter time frame for withdraw penalties, known as surrender charges. However, the L-shares when combined with riders that come with even extra costs that make the product even more expensive. The riders are added for a variety of reasons including to reduce market risk or modify death benefits.

FINRA Bars Former H.D. Vest Broker Richard Whitley

August 18, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Richard Whitley (Whitley) has been the subject of at least 13 customer complaints and one regulatory action that has resulted in Whitley being barred. FINRA launched an investigation into claims that Whitley recommended unsuitable investments to customers. In addition, to the regulatory bar from the agency, customer complaints against Whitley allege a number of securities law violations including that the broker made unsuitable investments, breach of fiduciary duty, misrepresentations and false statements, among other claims

Whitley entered the securities industry in 1982. From 1992, until August 2014, Whitley was registered with H.D. Vest Investment Services (HD Vest). In June 2015, Whitley was barred by FINRA from the financial services industry after failing to respond to the agencies investigation into claims

Advisers have an obligation to deal fairly with investors and that obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.

FINRA Bars Former Morgan Stanley Advisor Justin Amaral

August 13, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Justin Amaral (Amaral) has been barred for failing to respond to requests for information by the agency. The requests may have related to the reasons Morgan Stanley gave for terminating Amaral’s employment. Upon termination from Morgan Stanley the firm filed a Uniform Termination form (Form U5) stating that the reason for the firm’s termination of Amaral was due to allegations by the firm that Amaral became an executor and beneficiary in a client’s estate and that he used discretionary authority in several client accounts.

In addition, to the most recent FINRA action and bar, Amaral has been the subject of at least two customer complaints involving unsuitable closed-end funds and misrepresentations of investments involving mutual funds. According to FINRA, the agency made attempts to have Amaral appear for testimony concerning an unstated matter. Amaral failed to appear and was consequently barred from the securities industry.

It is important for investors to know that all advisers have an obligation and responsibility to deal fairly with investors including making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.