Articles Tagged with Summit Brokerage Services

shutterstock_172034843-300x200Broker Clay Hoffman (Hoffman) was recently sanctioned by The Financial Industry Regulatory Authority (FINRA) in an enforcement action that led to a permanent bar against the broker.  According to BrokerCheck, FINRA found that Hoffman consented to sanctions that he executed discretionary transactions in a customer’s account without prior written authorization from the customer to exercise discretionary trading or approval by his brokerage firm.

The securities lawyers of Gana LLP are also investigating customer complaints against Hoffman.  There have been at least 14 customer complaints against Hoffman, four regulatory actions, and one employment termination for cause in Hoffman’s 14 year career.  The customer complaints against Hoffman allege a number of securities law violations including that the broker made unauthorized trading, fraud, and breach of fiduciary duty among other claims.

The most recent customer complaint was filed in April 2015 and alleges unsuitable investments, unauthorized trading, and misrepresentations causing $234,697 in damages.  The claim was settled.

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shutterstock_175835072-300x199The investment fraud attorneys with Gana LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Gary Saitowitz (Saitowitz) currently not associated with any broker-dealer.  According to brokercheck records Saitowitz has been subject to three customer complaints, declared bankruptcy in March 2015, was terminated for cause by Transamerica Financial Advisors, Inc. (Transamerica), and sanctioned by FINRA in January 2017.  Saitowitz’s termination for cause and FINRA sanctions involve his conduct concerning direct participation products (DPPs) such as non-traded real estate investment trusts (REITs) and potentially other alternative investments.

In January 2017, Saitowitz consented to FINRA sanctions that he had customers sign blank and incomplete brokerage forms and that some of the pre-signed forms authorized fund movement or loans from customer accounts, while others related to customer financial information, used by the firm to supervise whether transactions solicited by Saitowitz were suitable for customers. FINRA found that the maintaining of pre-signed forms enhanced the risk that customers would be placed in unsuitable investments or subject to unauthorized account activity.  FINRA also found that his brokerage firm imposed limits on the amount of a customer’s liquid assets that could be invested in non-traded REITs but that in order to circumvent the limits Saitowitz maintained records overstating the liquid net worth of certain customers in connection with sales of non-traded REITs.

FINRA also found that Saitowitz used personal email addresses to conduct securities business in contravention of the firm’s policies and procedures. Finally, FINRA also determined that Saitowitz failed to report a judgment and a tax lien and to timely report five tax liens.

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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_172034843-300x200The securities lawyers of Gana LLP are investigating a customer complaint filed with The Financial Industry Regulatory Authority (FINRA) against broker Daniel Kiefer (Kiefer). According to BrokerCheck records Kiefer has been subject to at least three customer complaints and one employment separations for cause. The customer complaints allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and breach of fiduciary duty among other claims.

The most recent complaint was filed in August 2013, and alleged $1,090,718 in damages due to claims that the Kiefer, while employed at J.P Turner & Company, made unsuitable investment recommendations to the client and breached his fiduciary duty. The complaint settled in 2014 for $700,000. In October 2004, another customer filed a complaint alleging that the broker while employed at Grayson Financial, made unauthorized trades in clients account causing $25,000.00 in damages. The complaint settled in 2007 for $4,500.

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shutterstock_180341738Our investment attorneys are investigating customer complaints filed with The Financial Industry Regulatory Authority (FINRA) against Michael DiGaetano (DiGaetano) currently associated with Independent Financial Group, LLC (Independent Financial) alleging unsuitable investments, misrepresentations, fraud, negligence, breach of contract, and breach of fiduciary duty among other claims.  According to brokercheck records DiGaetano has been subject to three customer complaints and one regulatory sanction.

In May 2012 FINRA sanctioned DiGaetano alleging that as a supervisor he failed in responsibilities by not taking reasonable action to prevent another broker from committing securities fraud.  (FINRA No. 2009019209202) As part of the claim, FINRA alleged that DiGaetano failed to even contact customers who were subject to fraudulent mutual fund switches and never questioned the broker involved even though the trades were marked as unsolicited.

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shutterstock_94127350The Financial Industry Regulatory Authority (FINRA) announced that it has fined eight brokerage a total of $6.2 million for failing to supervise sales of variable annuities (VAs).  Five of the firms were required to pay more than $6 million to customers who purchased L-share variable annuities that came with potentially incompatible, complex and expensive long-term minimum-income and withdrawal riders.

FINRA’s enforcement actions were against the following firms.

  • VOYA Financial Advisors Inc. – fined $2.75 million.
  • Cetera Advisor Networks LLC – fined $750,000.
  • Cetera Financial Specialists LLC – fined $350,000.
  • First Allied Securities, Inc. – fined $950,000.
  • Summit Brokerage Services, Inc. – fined $500,000.
  • VSR Financial Services, Inc. – fined $400,000.
  • Kestra Investment Services, LLC – fined $475,000.
  • FTB Advisors, Inc. – fined $250,000.

FINRA ordered the firms to pay the following to investors.

The L-share VAs are complex investment products that combine insurance and investment features designed for short-term investors willing to pay higher fees in exchange for shorter surrender periods.  L-shares also have the potential to pay greater commissions to brokers than traditional share classes.

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shutterstock_89758564According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Francis Velten (Velten) has been the subject of at least eight customer complaints and one regulatory investigation over the course of his career. Customers have filed complaints against Velten alleging securities law violations including that the broker made unsuitable investments relating primarily to the sale of variable annuities.

Velten entered the securities industry in 1993. Since August 2006, Velten has been a registered representative of Summit Brokerage Services, Inc. out of the firm’s New Port Richey, Florida office location.

As a background, variable annuities are complex products that combine aspects of investing and insurance. The Securities and Exchange Commission (SEC) has released a publication entitled: Variable Annuities: What You Should Know encouraging investors to ask questions about the variable annuity before investing. Essentially, a variable annuity is a contract with an insurance company under which the insurer agrees to make periodic payments to you. The investor chooses the investments made in the annuity and value of your variable annuity will vary depending on the performance of the investment options chosen. The primary benefits of variable annuities are the death benefit and tax deferment of investment gains.

However, variable annuities are often unsuitable for investors because the benefits of variable annuities are often outweighed by the terms of the contract that include exorbitant expenses such as surrender charges, mortality and expense charges, management fees, market-related risks, and rider costs.

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shutterstock_180342179According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Anil Jethmal (Jethmal) has been hit with a large number of customer complaints. Jethmal’s record reveals a total of 5 customer complaints. However, 1996, the state of Georgia revoked Jethmal’s securities license in the state stating that approximately 27 customer’s had filed complaints against Jethmal up until that time. Customers have filed complaints against Jethmal alleging securities law violations including that the broker made unsuitable investments, churning, unauthorized trading, unauthorized use of margin, and misrepresentations among other claims.

Jethmal entered the securities industry in 1988. An examination of Jethmal’s employment history reveals that Jethmal 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 Jethmal’s 26 year career he has worked at 12 different firms. Since 2008 Jethmal has been registered with Westrock Advisors, Inc. and Summit Brokerage Services, Inc. Since March 2011, Jethmal has been associated with Newbridge Securities Corporation located in Boca Raton, Florida.

Churning is investment trading activity in the client’s account that serves no reasonable purpose for the investor and is transacted solely to profit the broker. The elements to establish a churning claim, which is considered a species of securities fraud, 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_146470052This article follows up on a recent article reported in Reuters concerning Atlas Energy LP’s private placement partnerships in oil and gas. Atlas Resources LLC, a subsidiary the energy group, has filed documents with the SEC for Atlas Resources Series 34-2014 LP stating that it seeks to raise as much as $300 million by Dec. 31 of 2014. The deal allows investors to participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of oil into viable prospects. In addition, Atlas promises to invest up to $145 million of its own capital alongside investors.

In the last article we explored how the house seems more likely to win on these deals over investors. But beyond the inherent risks with speculating on oil and gas and unknown oil deposits most investors don’t realize the deals are often unfair to investors. In a normal speculative investment as the investment risk goes up the investor demands greater rewards to compensate for the additional risk. However, with oil and gas private placements the risks are sky high and the rewards simply don’t match up.

In order to counter this criticism, issuers say that the tax benefits of their deals where the investor can write off more than 90 percent of their initial outlay the year they make it helps defray the risk and increase the value proposition. First, the same tax advantage claims are often nominal compared to the principal risk of loss of the investment as seen by Puerto Rican investors in the UBS Bond Funds who have now seen their investments decline by 50% or more in some cases. Second, often times brokers sell oil and gas investments indiscriminately to the young and old who have lower incomes and cannot take advantage of the tax benefits.

In fact, of the 28 people interviewed by Reuters who invested in deals from Atlas, Reef Oil & Gas Partners, Discovery Resources & Development LLC, and Black Diamond Energy Inc. 17 were retirees who had low tax burdens when the product was recommended to them.

By now you may be asking, how do these deals even get issued? First, the private placement market is very opaque. Issuers are only required to file a statement to exempt the security from registration and a few other details about the investment. Second, investors rely upon the brokerage industry’s due diligence on each issue they sell to ensure its suitability for investors. But many brokers use outside due-diligence firms that may be paid by the issuer, a conflict of interest, when evaluating deals. Indeed, some of the largest securities frauds in the private placement space have been the result of reliance on third-party due diligence.

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shutterstock_103610648As recently reported in Reuters, Atlas Energy LP has marketed itself to investors as a way to get into the U.S. energy boom. By contributing at least $25,000 in a private placement partnership that will drill for oil and gas in states such as Texas, Ohio, Oklahoma and Pennsylvania and share in revenues generated from the wells. Atlas Resources LLC, a subsidiary the energy group, has filed documents with the SEC for Atlas Resources Series 34-2014 LP stating that it seeks to raise as much as $300 million by Dec. 31 of 2014. The deal sounds good when pitched: participate in investments where advances in drilling technology have turned previously inaccessible reservoirs of fossil fuels into potentially viable prospects and to boot Atlas will invest up to $145 million of its own capital alongside investors. Through this method and similar deals, oil and gas projects have issued nearly 4,000 private placements since 2008 seeking to raise as much as $122 billion.

But before you take the plunge a review of the Atlas’s offering memorandum reveals some red flags and given Atlas’ past failure rate investors should think twice. First, up to $45 million of the money raised will be paid to Atlas affiliate Anthem Securities that will then be turned over to as commissions to broker-dealers who pitch the deal to investors. Up to $39 million more will be used to buy drilling leases from another affiliate. Think investors will get a fair price on the leases when Atlas controls both sides of the deal? More conflicts ahead as Atlas affiliated suppliers may also get up to $53 million for buying drilling and transport equipment. Next, an additional $8 million of Atlas’s investment is a 15 percent markup on estimated equipment costs. Finally, Atlas will pay itself nearly $52 million in various other fees and markups.

In sum, at least 40% of Atlas’s $145 million investment alongside mom and pop goes right back to the company. In addition, Atlas’ profits don’t stop there, when the venture starts generating revenue Atlas is entitled to 33% before accounting for those payments and markups. In the end, not much of a risk at all for Atlas.

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