Articles Tagged with securities fraud attorney

shutterstock_120556300-300x300According to BrokerCheck records financial advisor Frederick Houck (Houck), formerly associated with Freedom Investors Corp. (Freedom Investors), has been subject to one customer complaint, six tax liens or judgments, and one FINRA sanction.  According to records kept by The Financial Industry Regulatory Authority (FINRA) Houck has been accused by a customer of churning, negligence, excessive trading, and breach of fiduciary duty from August 2011 to January 2016 causing $150,000 in damages.  The claim is currently pending.

In August 2017 FINRA sanctioned Houck alleging that Houck exercised discretion in executing 491 transactions in the accounts of two customers as part of a recommended investment strategy without obtaining prior written authorization to exercise discretion and without his member firm having approved these accounts for discretionary trading.

Advisors are not allowed to engage in unauthorized trading.  Such trading occurs when a broker sells securities without the prior authority from the investor. All brokers are under an obligation to first discuss trades with the investor before executing them under NYSE Rule 408(a) and FINRA Rules 2510(b).  These rules explicitly prohibit brokers from making discretionary trades in a customers’ non-discretionary accounts. The SEC has also found that unauthorized trading to be fraudulent nature because no disclosure could be more important to an investor than to be made aware that a trade will take place.  Often times, brokers engage in unauthorized trading as part of an attempt to churn or excessively trade a client’s account.

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shutterstock_20354398-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Anthony Vultaggio, Jr. (Vultaggio), in September 2017, was accused by FINRA of failing to cooperate in an investigation into the circumstances surrounding Vultaggio alleged sale of undisclosed securities through an undisclosed outside business.  Vultaggio is formerly associated with American Capital Partners, LLC (American Capital).  According to the FINRA action, Vultaggio was barred by the regulator after the broker failed to respond to requests for documents and information during the investigation.

At this time the extent of Vultaggio’s outside business activities and securities sales are unknown.  The only public disclosure on Vultaggio’s BrokerCheck contains is Vultaggio’s investments in commercial and residential real estate.

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”.

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shutterstock_1744162-300x200According to BrokerCheck records financial advisor Jeffrey Smith (Smith), formerly associated with Accelerated Capital Group (Accelerated Capital), has been subject to five customer complaints and two regulatory actions.  According to records kept by The Financial Industry Regulatory Authority (FINRA) Smith has been accused by customers of unsuitable investment advice, securities fraud, and excessive trading among other claims.

The most recent regulatory action occurred in September 2017.  FINRA found that Smith maintained and utilized pre-signed and altered forms to conduct his securities business. FINRA determined that Smith’s conduct caused his brokerage firm to have inaccurate books and records. FINRA alleged that Smith had three customers sign blank forms and then made photocopies of some of the blank-signed forms so that he could reuse the customers’ signatures.  FINRA found that Smith then utilized these blank-signed forms to effect transactions.

In 2011 FINRA sanctioned Smith for failing to supervise brokers and enforce the firm’s supervisory procedures.

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shutterstock_178801067-300x200The securities lawyers of Gana LLP are investigating investor losses in American Finance Trust, a non-traded real estate investment trust (Non-Traded REIT).  According to the firm’s website, American Finance Trust is designed to protect shareholder capital and produce stable cash distributions through the acquisition and management of diversified portfolio of commercial properties leased to investment grade tenants.  The portfolio consists of core retail properties such as power centers and lifestyle centers.

According to a secondary market providers which allow investors to bid and sell illiquid products such as Non-Traded REITs, American Finance Trust sells for just under $15.50 per share – a significant loss on the original purchase price of $25.00.

Our firm often handles cases involving direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments.  These products are almost always unsuitable for middle class investors.  In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments providing perverse incentives for brokers to sell high risk and low reward investments.

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shutterstock_175835072-300x199The securities lawyers of Gana LLP are investigating investor losses in Strategic Realty Trust (SRT), a non-traded real estate investment trust (Non-Traded REIT).  SRT is a non-traded REIT focused on owning high quality west coast urban and street retail properties. The company states that its strategy is to build a portfolio of retail properties with solid growth prospects, strong cash flows, and visible value appreciation characteristics.

According to a secondary market providers which allow investors to bid and sell illiquid products such as Non-Traded REITs, SRT sells for just under $5.00 per share – a significant loss on the original purchase price of $10.00.

Our firm often handles cases involving direct participation products (DPPs), private placements, Non-Traded REITs, and other alternative investments.  These products are almost always unsuitable for middle class investors.  In addition, the brokers who sell them are paid additional commission in order to hype inferior quality investments providing perverse incentives for brokers to sell high risk and low reward investments.

According to studies, non-traded REITs have historically have underperformed even safe benchmarks, like U.S. treasury bonds – meaning that non-traded REITs provide paltry investment returns considering the risk an investor takes.  Alternative investment products like oil and gas partnerships, REITs, and equipment leasing programs 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 at all.

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shutterstock_143179897-300x300According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Clark Gardner (Gardner), in May 2014, was terminated by his then employer Cetera Advisors LLC (Cetera) subsequent to the initiation of customer arbitration claim alleging unsuitable investments.  Cetera stated that Gardner was terminated due to undisclosed outside business activities and the sale of unapproved products.

Shortly thereafter on May 29, 2015, Gardner was arrested for converting approximately $1.3 million in client funds by selling promissory notes to clients and depositing the funds into his personal bank account.  This activity is alleged to have occurred from November 2011 to April 2014.  Allegedly, Gardner used the money for luxury vacation packages, repaying personal funds owed to other individuals, and other items unrelated to the promised investments.

In addition, The Division of Securities for Utah’s Department of Commerce investigated Gardner after receiving a complaint from an investor.  During that investigation the department discovered a $150,000 property purchase Gardner completed with an unregistered real estate company that earned him $20,000 in compensation.  Gardner is reported to have promised the investor a steady income from the property and a significant return in five years.

However, these incidents are not the complete history of Gardner’s prior dealings.  FINRA brought action against Gardner in 2005 for “distributing copies of a brochure promoting an insurance policy that communicated false or misleading information.”

Charging documents state Gardner also was involved in a lawsuit in Pennsylvania for advising clients to “purchase life insurance policies while misrepresenting the nature and benefits of the policies.”

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shutterstock_185582-300x225According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker James Dresselaers (Dresselaers) is under FINRA investigation and subject to one customer complaint.  Dresselaers is currently employed by H. Beck, Inc. (H. Beck).  The FINRA investigation is looking into potential violations of NASD Rules 2310 and 2110 or Rules 2111 and 2010 relating to the suitability of recommendations to purchase securities made to one customer.  In December 2015 a customer filed a complaint alleging Dresselaers that recommended unsuitable investments in exchange traded funds and equity securities.

A common problem with exchange traded funds is a subset of investments called leveraged exchanged traded funds (Non-Traditional ETFs).  As a background, Non-Traditional ETFs behave drastically different and have different risk qualities from traditional ETFs.  While traditional ETFs seek to mirror an index or benchmark, Non-Traditional ETFs use a combination of derivatives instruments and debt to multiply returns on underlining assets, often attempting to generate 2 to 3 times the return of the underlining asset class.  Non-Traditional ETFs are also used to earn the inverse result of the return of the benchmark.

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shutterstock_180342179-300x200According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Peter Butler (Butler), in January 2017, was terminated by his firm Ameriprise Financial Services, Inc. (Ameriprise) over claims by the firm that Butler “resigned while on suspension pending termination for violation of company policy related to selling away and disclosure of an outside activity.”  In addition to the termination Butler has been subject to one regulatory action and four customer complaints.

The regulatory action by FINRA found that Butler failed to reasonably supervise a broker who was employed as a sales associate and office manager.  FINRA found that Butler failed to detect and prevent the office manager from converting money from a business organization belonging to Butler. FINRA determined that the office manager used this control to convert funds from the business in order to pay himself an additional salary and unauthorized commissions, as well as to otherwise take money to which he was not entitled. In addition, funds were converted from firm customers who were also his family members and domestic partner by depositing those funds into the business’ bank account, from which he continued to make unauthorized withdrawals.

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shutterstock_27597505-300x200According to BrokerCheck records Robert Yahney (Yahney), associated with Merrill Lynch Pierce, Fenner & Smith Incorporated (Merrill Lynch), has been subject to five customer complaints.  According to records kept by The Financial Industry Regulatory Authority (FINRA) Yahney has been accused by customers of unsuitable investment advice and investment strategy and appears to include options recommendations.

The most recent complaint filed in May 2017 alleges $1,000,000 in damages stemming from allegations of unsuitable investment recommendations and misrepresentation from February 2012 to June 2014. The claim is currently pending.  Another claim was filed by a customer in March 2017 alleging unsuitable investment recommendations and misrepresentation from August 2012 to July 2014 causing $300,000 in damages. The claim is currently pending.

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shutterstock_115937266-300x237According to BrokerCheck records Gaetano “Guy” Magarelli (Magarelli), now associated with Newbridge Securities Corporation (Newbridge), has been subject to five customer complaints and one lien.  According to records kept by The Financial Industry Regulatory Authority (FINRA) Magarelli has been accused by customers of unsuitable investment advice.  Some customers have also alleged unauthorized trading among other claims.

The most recent complaint filed in June 2017 alleges $84,000 in damages stemming from a two year period.  The claim is currently pending.  Another claim was filed by a customer in March 2017 alleging that there were unsuitable trades from 2010 through 2017 causing $131,000 in damages.  The claim has been denied by the firm.

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