Articles Tagged with Sterne Agee

shutterstock_185190197-300x199The law offices of Gana Weinstein LLP have recently filed a complaint on behalf of nearly a dozen investors 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 and otherwise aided his fraud causing them approximately $3,000,000 in losses.

If you unfortunately trusted Mustaphalli with your investments there is still time to act.  Gana Weinstein LLP’s securities fraud attorneys represent investors who have suffered investment losses at the hands of securities professionals. Details concerning Mustaphalli’s alleged fraud continue to surface.

On June 14th, 2017, New York Attorney General Eric T. Schneiderman announced charges against Mustaphalli and entities he controlled with defrauding elderly clients out of millions of dollars.  The New York Attorney General alleged that Mustaphalli engaged in a six-year scheme to defraud clients that were elderly and near retirement by investing their money in his hedge fund and in many instances without their knowledge  Schneiderman said in a statement – “As we allege, Dean Mustaphalli squandered and looted $10 million from hardworking individuals. New Yorkers deserve to know that their investments are safe—and financial professionals who won’t play by the rules will face consequences.”

shutterstock_120556300The securities lawyers of Gana Weinstein LLP are investigating a customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Mitchell Foote (Foote).  According to BrokerCheck records Foote has been subject to at least four customer complaints.  The customer complaints against Foote 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 non-traded real estate investment trusts (REITs), variable annuities, and other potentially 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.

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_186471755The investment lawyers of Gana Weinstein LLP are investigating a regulatory action brought by the Financial Industry Regulatory Authority (FINRA) against Wayne Schultz (Schultz) (FINRA No. 2015044640601) of Branchburg, New Jersey. According to the FINRA action, Schultz consented to a bar from the securities industry after he failed to provide documents and information requested by FINRA during its investigation concerning certain notes that Schultz had issued to an elderly client. The 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”.

At this time it unclear the nature and scope of Schultz’s outside business activities and private securities transactions. However, according to Schultz’s public records his outside business activities include a law practice. Often times, brokers sell promissory notes and other investments through side businesses as accountants, lawyers, or insurance to clients of those side practices.

Schultz was associated with brokerage firm TFS Securities, Inc. from September 2008 until December 2010. From January 2011 until June 2013 Schultz was registered with Sterne Agee Financial Services, Inc. Finally, from June 2013 until February 2016 Schultz was registered with Adirondack Trading Group LLC.

shutterstock_152149322The Financial Industry Regulatory Authority (FINRA) barred former Cetera Advisors LLC (Cetera) broker Bruce Sabourin (Sabourin) after the broker failed to respond to a letter from the regulator requesting information. While the BrokerCheck records kept by FINRA do not disclose the nature of the regulatory inquiry, in May 2014, Sabourin was terminated by Cetera for cause stating that the broker was terminated for excessive trading in client accounts and potential exercise of discretionary authority without written authorization.

According to the BrokerCheck records Sabourin has been the subject of at least four customer complaints, one employment separation, one regulatory action, and one criminal matter. The customer complaints against Sabourin allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

Sabourin entered the securities industry in 1994. From August 2001, until September 2009, Sabourin was associated with Investors Capital Corp. Thereafter, from September 2009, until February 2011, Sabourin was registered as a broker with MetLife Securities Inc. Thereafter, Sabourin was associated with Sterne Agee Financial Services, Inc. from February 2011, until December 2012. Finally, Sabourin was associated with Cetera from November 2012, until May 2014.

shutterstock_46993942The attorneys at Gana Weinstein LLP are investigating claims that former Sterne Agee Financial Services Inc. (Sterne Agee) broker Dean Mustaphalli (Mustaphalli) solicited millions of dollars from investors running to run a $6 million hedge fund on the side without formerly disclosing the activity to his brokerage firm. As reported by InvestmentNews, the Financial Industry Regulatory Authority (FINRA) charged Mustaphalli for founding and receiving commissions from a hedge fund he created called Mustaphalli Capital Partners in or about 2011 without informing his. Mustaphalli sold the investment through his registered investment advisory firm, Mustaphalli Advisory Group.

According to allegations made, Mustaphalli solicited money for the fund from at least 25 investors over six months during 2011. The fund invested in publicly traded equity and debt securities has since declined by approximately 90% according to investors. At least some of Mustaphalli’s clients were direct customers of Sterne Agee as well. According to FINRA, Mustaphalli was not cooperating with the agencies requests to provide account statements for the hedge fund. Typically in these cases if a broker does not cooperate with FINRA’s department of enforcement and the agency proves he withheld information the broker would be barred from the securities industry among other remedies that could be imposed.

Mustaphalli disclosed the existence of the Mustaphalli Advisory to Sterne Agee but did not disclose that he was managing the hedge fund through the firm according to FINRA. However, under the FINRA rules, brokers must fully disclose hedge funds for approval to their member firm and be supervised by the firm under Rule 3040.

The Financial Industry Regulatory Authority (FINRA) fined SAL Financial Services, Inc. dba Sterne Agee Financial Services, Inc. (Sterne Agee) concerning allegations that Sterne Agee failed to implement reasonable supervisory procedures to detect and prevent excessive trading activity, otherwise known as churning, in client accounts.

Sterne Agee has been a FINRA member since 1986 and the firm’s main office is located in Birmingham, Alabama. Sterne Agee has 137 branch office locations and employs 304 registered representatives.

FINRA alleged that from August 2009, through November 2010, Sterne Agee failed to establish and maintain a supervisory system and enforce written supervisory procedures reasonably designed to identify and prevent unsuitable excessive trading and churning in customer accounts. Specifically, FINRA found that Sterne Agee relied solely on a single exception report with inadequate parameters to identify active accounts with patterns of unsuitable and excessive trading. FINRA alleged that Sterne Agee had access to its clearing firm’s additional exception reports but that Sterne Agee failed to use those reports.  Consequently, FINRA concluded that Sterne Agee failed to identify at least thirty-nine accounts where thirty of the instances came from the Ft. Lauderdale, Florida office.

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