unsuitable investments

Broker Spotlight: Cantone Research’s Raymond DeRobbio

September 19, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Raymond DeRobbio (DeRobbio) has been the subject of seven customer complaints and one regulatory action. The customer complaints against DeRobbio allege that the broker made unsuitable investments concerning certain bonds that defaulted. The regulatory complaint against DeRobbio was initiated by the state of Indiana in which DeRobbio withdrew as an agent.

DeRobbio entered the securities industry in 1983 and since that time DeRobbio has been associated with over a dozen firms. Starting in June 2006 through July 2012, DeRobbio was associated with J.P. Turner & Company, L.L.C. From July 2012, until June 2013, DeRobbio was registered with Northeastern Financial Group, Incorporated. Finally, since June 2013, DeRobbio has been registered with Cantone Research Inc. out of a branch located in Tinton Falls, New Jersey.

All brokers and financial advisers have an obligation to their customers to deal with them in a fair manner. That obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.

Broker Spotlight: Advisor Robert Batchen Unauthorized Trading Claims

September 17, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Robert Batchen (Batchen) has been the subject of at least five customer complaints, one judgement/lien, and one employment separation for cause over the course of his career. Customers have filed complaints against Batchen allege claims including that the broker made unsuitable investments, unauthorized trades, and failure to follow instructions among other claims. In addition to customer complaints, Batchen was also subject to an employment separation from Wells Fargo Advisors LLC (Wells Fargo) where the broker resigned during an internal review of allegations of unauthorized trading.

Batchen entered the securities industry in 1990. From January 2008, until September 2012, Batchen was associated with Wells Fargo. Currently, Batchen is a registered representative of Uhlmann Price Securities, LLC.

Advisors are not allowed to engage in unauthorized trading. Such trading occurs when a broker sells securities without the prior authority from the investor. The broker must first discuss all 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.

FINRA Bars Former Stifel, Nicolaus Broker Kenneth Hornyak Over Short Term Trading

September 15, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned and barred broker Kenneth Hornyak (Hornyak) (Case No. 2013038511901) alleging that the broker failed to respond the regulator’s requests for documents and information. FINRA’s investigation appeared to focus on claims that Hornyak engaged in potential discretionary trading, unauthorized trading, and unsuitable short-term trading in Unit Investment Trusts (UITs). On May 11, 2015, Hornyak informed FINRA that he would not appear for questioning and the regulator subsequently barred the broker.

According to the BrokerCheck records kept by FINRA Hornyak has been the subject of at least four customer complaints, one regulatory action, and two employment terminations for cause. Customers have filed complaints against Hornyak alleging a litany of securities law violations including that the broker made unsuitable investments, unauthorized trades, churning, and excessive sales charges among other claims.

Hornyak entered the securities industry in 1998 with Morgan Stanley. From March 2006, until January 2014, Hornyak was associated with Stifel, Nicolaus & Company, Incorporated. In January 2014, Stifel, Nicolaus terminated Hornyak for cause alleging that Hornyak was terminated because of violation of firm policies regarding exercising discretion without written authorization.

FINRA Bars Thomas Hogle Over Investigation Into Unsuitable Trades in a 101 Year Old’s Account

September 13, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) barred (Case No. 20150443048) broker Thomas Hogle (Hogle) after the broker failed to respond to a letter from the regulator requesting information. While the BrokerCheck records kept by FINRA do not disclose all the facts being investigated by the regulatory inquiry, FINRA sent Hogle a request for documents in connection with their investigation that unsuitable investment recommendations were made in an account of a 101 year-old customer. On April 15, 2015, Hogle acknowledged FINRA’s requests but refused to produce documents or information resulting in the bar from the securities industry.

According to the BrokerCheck records Hogle has been the subject of at least one customer complaint and three financial matters and liens. The customer complaints against Hogle allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading) among other claims.

Hogle entered the securities industry in 1998. From April 2008, until September 2011, Hogle was associated with Nelsonreid, Inc. Thereafter, from October 2011, until May 2015, Hogle was a registered representative of B.B. Graham & Company, Inc.

Customers Files Churning Complaints Against Patrick Teutonico

September 12, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Patrick Teutonico (Teutonico) has been the subject of at least nine customer complaints and one regulatory action over the course of his career. Customers have filed complaints against Persaud alleging a litany of securities law violations including that the broker made unsuitable investments, unauthorized trades, breach of fiduciary duty, churning, negligent supervision, excessive mark ups, and fraud among other claims. In addition to customer complaints, Teutonico was also subject to a regulatory action by FINRA where the regulator found that Teutonico effected unauthorized trades and was fined and suspended.

An examination of Teutonico’s employment history reveals that Teutonico 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 Teutonico’s 17 year career he has worked at 10 different firms. Since 2008 Teutonico has been registered with First Midwest Securities, Inc., A&F Financial Securities, Inc. QA3 Financial Corp., Obsidian Financial Group, LLC. Since December 2012, Teutonico has been associated with Network 1 Financial Securities Inc. located in Lynbrook, New York.

Advisors are not allowed to engage in unauthorized trading. Such trading occurs when a broker sells securities without the prior authority from the investor. The broker must first discuss all 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.

Broker Spotlight: Claims Against Former AXA Advisors Broker Dennis Lee

September 11, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Dennis Lee (Lee) has been the subject of one customer complaint, four financial disclosures, and one employment separation. The customer complaint against Lee alleges that the broker made unsuitable investments, transferred funds to a new account without the client’s knowledge or consent, engaged in unauthorized trading, and submitted forged documents. The client alleges over $1,000,000 in damages due to the misconduct. Approximately two months after disclosing the customer complaint AXA Advisors, LLC (AXA) terminated Lee. The termination was for cause and stated that Lee was discharged for failing to disclose financial issues that required the broker to file a U4 amendment, mismarking trade tickets, and placing securities trades away from the firm, otherwise referred to as “selling away.”

Lee entered the securities industry in 1993 and since that time Lee has been associated with AXA until his termination in April 2015.

Advisers have an obligation to deal fairly with investors and that obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.

Broker Spotlight: Customer Complaints Against Francine Frechter

September 10, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Francine Frechter (Frechter) has been the subject of two customer complaints and one employment separation. The customer complaints against Frechter allege a number of securities law violations including that the broker made unsuitable investments, misrepresentations, and failure to follow instructions among other claims.

Frechter entered the securities industry in 1984. Since 2000 Frechter was associated with Citigroup Global Markers Inc. From June 2009, until January 2014, Frechter was a registered representative with Wells Fargo Advisors, LLC. In December 2013, Frechter was discharged from Wells Fargo concerning allegations that Frechter recommended a lending product to three clients that was contrary to the firm’s policies. Currently, Frechter is associated with Stifel, Nicolaus & Company, Incorporated.

Advisers have an obligation to deal fairly with investors and that obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.

FINRA Bars Former Cetera Advisors Broker Bruce Sabourin

September 9, 2015 | by Staff Attorney

The 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.

Broker Investigation: NFP Advisor Services Broker Kevin Ellman

September 4, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Kevin Ellman (Ellman) has been the subject of at least four customer complaints and one regulatory action. The customer complaints against Ellman allege in one of the complaints that the broker made misrepresentations related to the sale of auction rate securities. In another complaint, the customer alleged negligence in connection with a mezzanine financing investment. In a third complaint, the customer alleged that Ellman made unsuitable investment recommendations.

Ellman entered the securities industry in 1991. From January 2006 onward Ellman has been registered with NFP Advisor Services, LLC (NFP Advisor).

Advisers have an obligation to deal fairly with investors and that obligation includes making suitable investment recommendations. In order to make suitable recommendations the broker must have a reasonable basis for recommending the product or security based upon the broker’s investigation of the investments properties including its costs, benefits, risks, tax consequences, and other relevant factors. In addition, the broker must also understand the customer’s specific investment objectives to determine whether or not the specific product or security being recommended is appropriate for the customer based upon their needs.

FINRA Sanctions Five Brokers Affiliated with HFP Capital Markets

September 3, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned five brokers formerly associated with now expelled brokerage firm HFP Capital Markets LLC (HFP Capital) (Case No. 2010024522103) including brokers Jonah Engler (Engler), Brett Friedberg (Friedberg), Jonathan Sheklow (Sheklow), Joshua Turney (Turney), and Hector Perez (a/k/a Bruce Johnson) (Perez) concerning allegations that between December 2009, and February 2011, the five brokers fraudulently sold a total of nearly $3 million worth of Senior Secured Zero Coupon Notes (MMM Notes) issued by Metals, Milling and Mining LLC in a private placement offering to 59 customers.

FINRA alleged that the brokers misrepresented material facts about the offering by promising to pay a return of 100 percent in one year by purportedly extracting precious metals from materials left over from mining operations. In reality, FINRA determined that the investors lost all of the money that they invested in the MMM Notes, with the exception of three investors who were repaid with funds from new investors in a Ponzi scheme like fashion. FINRA determined that the brokers also recklessly failed to conduct a reasonable investigation, or due diligence, of the viability and legitimacy of company in the face of numerous red flags that it was a fraud.

In addition, FINRA alleged that the brokers recklessly misrepresented to customers that: (a) the MMM Notes were collateralized by certain barrels of ore concentrate; and (b) the collateral ore concentrate was of sufficient value to secure the investment in the MMM Notes. In fact, FINRA found that there was no collateral for the MMM Notes because the company did not own any ore concentrate. FINRA determined that the broker’s representations concerning the MMM Notes were recklessly and misrepresented material facts regarding the MMM Notes in willful violation of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 (the anti-fraud provision) as well as several industry rules. In sum, the brokers failed to obtain even basic information about the company necessary to the due diligence process in order to understand an investment in the company and therefore lacked a reasonable basis to recommend the MMM Notes to investors.