Articles Tagged with Summit Brokerage Services

shutterstock_78659098-300x225According to BrokerCheck records kept by The Financial Industry Regulatory Authority (FINRA) advisor Jonathan Freeze (Freeze), in August 2017, was accused by FINRA of failing to cooperate in an investigation into the circumstances surrounding Freeze’s alleged sale of variable annuities.  Freeze is formerly associated with Fortune Financial Services, Inc. (Fortune Financial).  According to the FINRA action, Freeze was barred by the regulator after the broker failed to respond to requests for documents and information during the investigation.

In 2015, Feeze was also sanctioned by FINRA concerning allegations that he borrowed $20,000 from his customer and failed to provide the firm with prior notice of the loan and failed to obtain prior written pre-approval for the loan.  Freeze has also been subject to two terminations for cause and multiple financial disclosures.

Variable annuities are complex financial and insurance products.  In fact, recently the Securities and Exchange Commission (SEC) 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.

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 Weinstein 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.

shutterstock_128655458-300x200Our law firm, Gana Weinstein 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 Weinstein 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.

Brokers have a responsibility to 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.  Advisors are also 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.

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.

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.

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.

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.

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.

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.

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.