Articles Tagged with Suitability

shutterstock_145368937-300x225The securities and investment fraud attorneys at Gana LLP are investigating the regulatory complaint filed by The Financial Industry Regulatory Authority (FINRA) against broker Stanley Clayton Niekras (Niekras). The FINRA regulatory action alleges that Niekras recommended unsuitable variable annuity exchanges in three customers’ accounts. FINRA found that Niekras effected the annuity exchanges to benefit himself at the customers’ expense. Niekras allegedly misrepresented himself to a couple in their 90s claiming $70,000 of fees due for financial planning services. According to BrokerCheck records, Niekras has been subject to eight customer complaints and one regulatory action among other claims.

The FINRA complaint alleges that Niekras made fraudulent misrepresentations to an elderly couple in their 90s to collect more than $70,000 in estate and financial planning fees while associated with the brokerage firm MML Investors Services, LLC. FINRA alleges that Niekras didn’t have an investment advisory or financial planning agreement with the elderly couple, but he billed them for hundreds of hours of time that he supposedly spent working on their “financial future”, work that he claimed to have done over four years knowing he wasn’t entitled to the “estate planning” or “financial planning” fees he charged. In February 2013, he recommended that the children buy a particular variable annuity with the gifted assets, anticipating collecting about $75,000 in commissions from the sales. The claim is currently pending.

The most recent complaint was filed in December 2010 alleging unsuitable variable annuity recommendations in clients account from January 1995 through March 2005 causing over $5,000 in damages. The claim settled for $247,500.00.

shutterstock_132704474-300x200The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Swan Sihua Shen (Shen) also known as Swan Sihua Zhang. According to BrokerCheck records there are at least six disclosures on Shen’s record including customer complaints, multiple regulatory actions, and one employment separation from CUNA Brokerage Services.

The most recent regulatory action against Shen was filed by the Maine office of Securities in October 2016 alleging that she failed to disclose history records so as a result was ordered for heightened supervision for 2 years.

In February 2015, the State of Massachusetts filed a claim against Swan Shen alleging that she repeatedly violated firm policies by copying and pasting client signatures, and altering forms which was precipitated by her termination from CBS in August 2013.

shutterstock_183201167-300x198The investment attorneys of Gana LLP are interested in speaking with clients of broker Parks Heard Brown Jr. (Brown). According to his BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA), Brown has been the subject of at least four customer complaints. The customer complaints against Brown allege securities law violations that claim unsuitable investments, churning, unauthorized trading, breach of fiduciary duty, and negligence among other claims.

The most recent complaint was filed in October 2016, alleging that the broker while employed at VSR Financial Services Inc. made unsuitable investments based on the client’s liquidity needs. In March 2014, FINRA found that Brown violated FINRA rules 2090 and 2111 that require the use of reasonable diligence when recommending investment strategies. In addition, a customer alleged an unsuitable series of investments made in account between June 2012 and January 2014 resulting in damages of $245,750.00. The case settled for $71,500.00.

In another case filed in March 2004 a customer alleged that in June 2003 Brown misrepresented and failed to inform the account activity that caused $7,000.00

shutterstock_128655458-300x200Our law firm, Gana LLP, is investigating claims made by Financial Industry Regulatory Authority (FINRA) against broker James Vernon Regier (Regier), formerly associated with Summit Brokerage Services, Inc. The customer complaints allege that Regier engaged in securities law violations, including making unsuitable investments in clients’ accounts. The most recent complaint filed in July 2016 alleges that between 2010 and 2015, Regier engaged in unsuitable trading in a customer’s account by recommending purchases of publicly traded shares of United Development Funding IV (UDF). The complaint is currently pending. In April 2016, another investor filed a complaint and alleged unsuitable activity occurring in the investor’s account from April 2015 – March 2016, causing damages of greater than $5,000.00. That complaint is also currently pending. In January 2012, a customer filed a complaint alleging unsuitable trading activity in 2008. The claim was settled for $104,191.00.

Regier first became associated with FINRA in 2002. Below are the firms that Regier has been employed by and registered with throughout his career:

  • Washington Square Securities, Inc. (January 2002 – August 2002)

shutterstock_184430612The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Neal Scott (Scott).  According to BrokerCheck records there are at least four customer complaint, one regulatory, and seven judgments or liens that have been filed against Scott.  The most recent customer complaint against Scott alleges a number of securities law violations including breach of fiduciary duty and suitability among other claims.  The claim is currently pending.

The most recent judgement or lien disclosure was filed in January 2009 and concerns a tax lien for $47,103.  Tax liens and judgements are often a sign that the broker cannot manage their own personal finances and may be tempted to recommend high commission products or strategies to clients in order to satisfy debts.

In addition, the Virginia Securities Department alleged that Scott failed to complete his registration process in time and denied his registration in the state.

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_85873471The securities fraud lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker James Flower (Flower).  According to BrokerCheck records Flower has been the subject of at least four customer complaints and one bankruptcy that was disclosed in January 2016.  The customer complaints against Flower allege a number of securities law violations including that the broker made unsuitable investments, excessive use of margin, and churning (excessive trading) among other claims.

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.

An examination of Flower’s employment history reveals that Flower moves from troubled firm to troubled firm.  The pattern of brokers moving in this way is sometimes called “cockroaching” within the industry.  See More Than 5,000 Stockbrokers From Expelled Firms Still Selling Securities, The Wall Street Journal, (Oct. 4, 2013).  In Flower’s 18 year career he has worked at least 15 different firms.  What’s more astonishing is that seven of those firm’s have been expelled from the industry by FINRA and in many instances for securities laws violations for mistreating their customers.

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shutterstock_106111121The securities lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against broker Matthew Turner (Turner).  According to BrokerCheck records Turner has been subject to at least five customer complaints and one pending bankruptcy.  The customer complaints against Turner allege securities law violations that including unsuitable investments, unauthorized trading, unsuitable use of margin, and churning among other claims.

In July 2014 a customer filed a complaint alleging $40,000 in damage stemming from unsuitable investment recommendations from 2010 through 2012.  The complaint settled.  In November 2012, another customer filed a complaint alleging unsuitable investments causing $450,000.  The claim settled.  In addition, in April 2015, Turner filed for bankruptcy.  Such 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.

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shutterstock_27597505The securities fraud lawyers of Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Shadi “Sean” Barakat (Barakat).  According to BrokerCheck records Barakat has been the subject of at least two customer complaints and two judgements or liens.  The customer complaints against Barakat allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, misrepresentations, and churning (excessive trading) among other claims.

One complaint filed in June 2013 alleged $500,000 in damages due to unsuitable recommendations and churning.  The complaint was settled.  Barakat has disclosed several large tax liens including a $1,758 lien in April 2015 and a tax lien of $14,331 in May 2014.  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.

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shutterstock_132704474According to Reuters, Arch Coal which is the second-largest U.S. coal miner has filed for Chapter 11 bankruptcy in mid-January. The investment attorneys at Gana LLP continue to report on investor losses in commodities related investments. Our firm is investigating potential securities claims against brokerage firms over improper sales practices related to recommendations in commodities products such as bonds, exchange traded notes (ETNs), structured notes, private placements, mutual funds, and individual stocks.

Arch Coal plans to cut $4.5 billion in debt from its balance sheet after suffering through a prolonged coal market downturn. Arch Coal has about 4,600 employees. As we have previously reported, coal related companies around the world are being pushed to the brink of bankruptcy due to the falling prices of commodities. Other bankruptcy filings this year include Walter Energy (Stock Symbol: WLTGQ), JW Resources, Patriot Coal, Xinergy, and James River Coal Co. among others. According to Bloomberg, more than three dozen coal operations have filed bankruptcy in just over three years. Due to a combination of factors the combined market value of U.S. coal company shares shrank to $12 billion in late July 2015 from $78 billion in 2011.

In the case of Arch Coal the company became saddled with debt since its 2011 acquisition of International Coal Group and then was unable to overcome a range of negative market trends including a drop in coal prices. The company expects its mining operations and shipments to continue uninterrupted through the reorganization process. According to sources, 25 percent of U.S. coal industry is currently in bankruptcy.

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shutterstock_143685652The Financial Industry Regulatory Authority (FINRA) brought and enforcement action (FINRA No. 2012034029401) against broker Denny Darmodihardjo (Darmodihardjo) resulting in a $25,000 fine and an 18 month suspension from the securities industry. FINRA alleged that Darmodihardjo, between September 2009, and July 2011, engaged in excessive trading of three accounts owned by customer a customer referred to by the initials “AG” in violation of the FINRA rules and recommended unsuitable short-selling and margin use in transactions for the same customer also.

In addition to the FINRA action, Darmodihardjo has a long history of complaints and disclosures including two other regulatory actions, at least 13 customer complaints, one financial disclosure, and 4 judgments or liens. In January 2014, FINRA suspended Darmodihardjo for one month and imposed a $2,500 fine after the regulator alleged that Darmodihardjo failed to timely disclose the fact that he an outstanding federal tax lien. Darmodihardjo’s BrokerCheck record now lists several tax liens including a $35,771 lien disclosed in January 2015, a $16,240 lien disclosed in October 2014, a $49,422 lien disclosed in November 2013, and a $74,197 tax lien disclosed in October 2011.

Excessive trading occurs when a broker exercises control over a customer’s account and the level of trading activity is inconsistent with the customer’s investment objectives, financial situation, experience, and other needs. Excessive trading is measured by the turnover rate or the number of times the value of the account is turned over a period of time. Another measure used is the cost-to-equity ratio or the percentage of return on the customer’s average net equity needs to return to cover commissions and other account expenses over a period of time.

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