securities fraud

Gana LLP Files Complaint on behalf of Client Defrauded by Dean Mustaphalli

January 14, 2017 | by Staff Attorney

The 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).

Broker Investigation: Customer Complaints Against Advisor Christian Herrera

November 18, 2016 | by Staff Attorney

Attorneys at Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Christian Herrera (Herrera) alleging unsuitable investments and unauthorized trading among other claims. According to brokercheck records Herrera has been subject to five customer complaints, one financial disclosure – a bankruptcy, and one regulatory event.

A customer filed a complaint in October 2013 alleging that the broker made unsuitable recommendations by over-concentrating their leading to $39,229 in losses. The claim was settled for $14,000.

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.

Broker Steven Shmulewitz Subject to Customer Churning Complaints

September 13, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Steven Shmulewitz (Shmulewitz). According to BrokerCheck records Shmulewitz has been the subject of at least nine customer complaints. The customer complaints against Shmulewitz 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 May 2016 and alleged unauthorized use of margin in the customer’s account from 2011 through March 2014 causing $250,000. Thee complaint settled for $52,800. In May 2015, another customer alleged excessive commissions, mishandling of the account and misrepresentations leading to $21,000 in damages. The complaint settled for $20,000.

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.

Gana LLP Wins Arbitration Award On Behalf of Client Against Centaurus Financial

June 11, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are pleased to announce an award on behalf of their client against Centaurus Financial, Inc. (Centaurus) in the amount of $150,000 plus costs. The complaint was filed The Financial Industry Regulatory Authority (FINRA) and involved multiple brokerage firms that hired advisor Ahmad Hashemian.

The Claimant alleged that Hashemian invested over $2,000,000 in exclusively high cost products and 50% of those investments were in alternative investments such as private placements, oil and gas partnerships, and non-traded real estate investment trusts (REITs). The other 50% was invested in variable and equity-indexed annuities. All of these investments come with high costs and historically have underperformed even safe benchmarks, like U.S. treasury bonds. Brokers, enticed by the high commissions, often times misled their clients into investing in these products.

In this case the panel found that “the investments Hashemian recommended while at Centaurus were not suitable and in Margaret Polito’s best interests. Margaret Polito also provided sufficient evidence to meet her burden of proof to support her allegations in her Statement of Claim that the actions by Hashemian, for which Centaurus is responsible, constitute fraudulent and negligently made material misrepresentations and omitted material information in the sale of the investments to Margaret Polito.” Award Can Be Found Here.

Customers File Numerous Complaints Against Broker Marc Jaffe

May 16, 2016 | by Staff Attorney

The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against former Finance 500, Inc. (Finance 500) broker Marc Jaffe (Jaffe). According to BrokerCheck records Jaffe was recently sanctioned by FINRA and discharged by his prior employer in or about September 2015. The FINRA action found that Jaffe failed to timely disclose tax liens on his record. Shortly thereafter, Finance 500 terminated Jaffe for cause stating that the broker entered into a commission sharing agreement in a state where he was not registered.

In addition, Jaffe has been subject to an eye popping 36 customer complaints and two judgements or liens totaling over $700,000 in tax lien debt. The lien disclosures on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services. A broker’s inability to handle their personal finances has also been found to be relevant in helping investors determine if they should allow the broker to handle their finances.

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.

FINRA Files Complaint Against Ricky Moore Over Church Bonds Selling Away Allegations

March 9, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating a regulatory complaint (Disciplinary No. 2013038770901) filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Ricky Moore (Moore). FINRA alleged that between March 2012 and April 2013, while he was registered with Commonwealth Financial Network (Commonwealth Financial) Moore failed to disclose to the firm his outside business activities, also referred to as “selling away”, involving the facilitation of a church bond offering for a church located in Brazoria, Texas. In addition, to the FINRA complaint Moore has been subject to three customer complaints.

FINRA alleged in the complaint that Moore failed to disclose to his member firm his outside business activities involving the facilitation of a church bond offering for a church. The complaint alleges that Moore acted as the president and director of the church and facilitated the church bond offering for the church. In addition, FINRA found that Moore made a false and misleading statement on his firm’s annual compliance questionnaire when asked whether he had participated in raising capital, equity, or debt for a public or private investment. Moore answered “No” and also falsely stated that he had no undisclosed outside business activities. Thereafter, Commonwealth Financial conducted an investigation and Moore was permitted to resign after the firm terminated Moore’s registration.

In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

Merrill Lynch Terminates Broker Patrick Sands on Selling Away Allegations

February 29, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating the employment separation filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Patrick Sands (Sands). According to BrokerCheck records Sands has been the subject of at least one customer complaint and one employment termination for cause.

In November 2015, Sands’ then brokerage firm Merrill Lynch, Pierce, Fenner & Smith Incorporated (Merrill Lynch) terminated Sands for cause alleging that the broker engaged in conduct inconsistent with the firm’s selling away policies. Participated in private securities transactions without approval of the firm is a practice known as “selling away” in the industry. The allegations appear to involve investments in private placements or direct participation programs such as non-traded real estate investment trusts (Non-Traded REITs), oil and gas programs, or equipment leasing.

In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.

FINRA Bars Broker Eugene Smietana For Failing to Respond to Investigation Requests

February 25, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) and the agency’s bar of broker Eugene Smietana (Smietana). According to BrokerCheck records Smietana has been the subject of at least four customer complaints, one employment termination for cause, and four tax liens or judgments. The customer complaints against Smietana allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

In September 2015, Smietana was barred by FINRA for failing to respond to the regulators requests for information. In addition, Smietana has several sizeable liens and judgments entered against him. Substantial judgements and liens on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services. A broker’s inability to handle their personal finances has also been found to be relevant in helping investors determine if they should allow the broker to handle their finances.

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.

Broker Investigation: UBS Financial Broker William Carlton

February 18, 2016 | by Staff Attorney

The securities fraud lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker William Carlton (Carlton). According to BrokerCheck records Carlton has been the subject of at least five customer complaints and two judgments or liens. The customer complaints against Carlton allege a number of securities law violations including that the broker made unsuitable investments and misrepresentations among other claims.

The most recent customer complaint filed in October 2015 alleged unsuitable recommendations and concentrated positions in mutual funds, ETFs, and equity investments alleging losses of $1,264,355 in damages. The claim is still pending. Another claim was filed in January 2015 and alleged unsuitable concentrated positions in real estate limited partnerships and oil and gas stocks. In addition, Carlton has a tax lien of $132,060 that was filed in October 2014. Brokers are required to disclose financial matters that impact their personal finances. Substantial judgements and liens on a broker’s record can reveal a financial incentive for the broker to recommend high commission products or services. A broker’s inability to handle their personal finances has also been found to be relevant in helping investors determine if they should allow the broker to handle their finances.

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.

Advisor Kevin Wanner Accused of Selling Fraudulent Securities

February 15, 2016 | by Staff Attorney

The investment fraud lawyers of Gana Weinstein LLP are investigating regulatory complaints and the termination by Questar Capital Corporation (Questar) of broker Kevin Wanner (Wanner). Questar discharged Wanner alleging that The North Dakota Securities Department (NDSD) issued a cease and desist alleging that Wanner sold time certificate of deposit securities purporting to represent an investment in an FDIC insured interest bearing account and further misrepresented to the investors that their funds would be deposited with the FDIC member financial institutions represented. Instead, the funds were deposited into accounts owned and controlled by Wanner for his own purpose. Thereafter, on December 31, 2015, the NDSD revoked Wanner’s securities license in the state. On January 11, 2016, FINRA permanently barred Wanner form the securities industry.

According to new sources, Wanner and Precision Financial Services were barred from engaging in the business of insurance and from withdrawing any moneys from any banking or financial accounts. The order alleges that two people were given fraudulent certificates of deposit which cannot be authenticated by the banks listed on the documents.

The conduct allegedly engaged in by Wanner is also referred to as “selling away” in the industry. In the industry the term selling away refers to when a financial advisor solicits investments in companies, promissory notes, or other securities that are not pre-approved by the broker’s affiliated firm. However, even though when these incidents occur the brokerage firm claims ignorance of their advisor’s activities the firm is obligated under the FINRA rules to properly monitor and supervise its employees in order to detect and prevent brokers from offering investments in this fashion. In order to properly supervise their brokers each firm is required to have procedures in order to monitor the activities of each advisor’s activities and interaction with the public. Selling away misconduct often occurs where brokerage firms either fail to put in place a reasonable supervisory system or fail to actually implement that system. Supervisory failures allow brokers to engage in unsupervised misconduct that can include all manner improper conduct including selling away.