unsuitable investments

Customers File Complaints Against National Securities Corporation Broker Michael Fasciglione

September 2, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Michael Fasciglione (Fasciglione) has been the subject of at least 11 customer complaints and two regulatory actions. The customer complaints against Fasciglione allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading), breach of contract, breach of fiduciary duty, negligence, fraud, misrepresentation, and failure to supervise among other claims. The customer complaints stem from 1995 through 2014 and total allegations of investor losses of multiple millions of dollars.

Fasciglione’s first regulatory action occurred in 2004, when the NYSE initiated an action for alleging that Fasciglione failed to supervise the activities of an employee related to the business of his employer; failing to supervise accounts serviced by a registered representative under his control; failing to ensure proper authorization of account designation changes, along with several other allegations. As a result, of the complaint Fasciglione was suspended for two months and required to re-take any qualifying exams before undertaking any securities supervisory positions.

Fasciglione’s latest regulatory complaint alleges that in or about March 2010, while the IRS filed a $354,752 tax lien against Fasciglione for the tax years 2007 and 2008. An amended Form U4 was filed on November 26, 2012, but FINRA found that this filing was untimely.

Customers File Complaints Against National Securities Corporation Broker Leonard McAbee

August 28, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Leonard McAbee (McAbee) has been the subject of at least three customer complaints, one regulatory action, one judgment and/or lien, and one employment separation. The customer complaints against McAbee allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading), among other claims. The regulatory action against McAbee involved allegations that McAbee made trades in an account at the direction of a third-party without a properly signed power of attorney.

McAbee entered the securities industry in 1990. From April 2011 till present McAbee has been registered as a broker with National Securities Corporation.

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. Many of the claims against McAbee involving claims of unauthorized trading, churning, and excessive trading.

Broker Spotlight: TIC Customer Complaints Against John Notman

August 27, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker John Notman (Notman) has been the subject to an astonishing 31 customer complaints along with two firm terminations for cause. The customer complaints against Notman allege a number of securities law violations including that the broker made unsuitable investments and misrepresentations and false statements among other claims. Many of the complaints involve Notman’s sales of tenants-in-common (TICs). These claims along alleged combined investor losses of well over $20,000,000.

Notman entered the securities industry in 1982. From March 2003, until September 2012, Notman was registered with Berthel, Fisher & Company Financial Services, Inc (Berthel Fisher). In September 2012, Berthel Fisher filed a notice of termination Form U-5 stating that the reason for terminating Notman from the firm was due to his failure to report certain financial disclosures.

As a background, TICs largely been sold unfairly as tax advantaged products that allow customers to defer capital gains taxes on appreciated real estate. TICs are private placements that have no secondary trading market and are therefore illiquid investments. In a typical TIC, the investor receives a fractional interest in the property along with other stakeholders and the profits are generated mostly through the efforts of the sponsor and the management company that manages and leases the property. The sponsor typically structures the TIC investment with up-front fees and expenses charged to the TIC and negotiates the sale price and loan for the acquired property. Because these fees are often higher than 15%, there is often no way for the investment to be profitable for the investor.

Broker Investigation: Customer Complaints Against RBC Capital Broker David Peirce

August 26, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker David Peirce (Peirce) has been the subject of at least four customer complaints. The customer complaints against Peirce allege a number of securities law violations including that the broker made unsuitable investments, churning (excessive trading), among other claims..

Peirce entered the securities industry in 1989. From April 2004, until February 2009, Peirce was registered with Morgan Stanley Smith Barney (Morgan Stanley). From June 2009 onward Peirce was associated with RBC Capital Markets, LLC (RBC).

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. Many of the claims against Peirce involving claims of churning and excessive trading. When brokers engage in churning the investment trading activity in the client’s account serves no reasonable purpose for the investor and is transacted to profit the broker through the generation of commission payments. 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.

Broker Spotlight: TIC Customer Complaints Against Mark Kosanke

August 26, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Mark Kosanke (Kosanke) has been the subject of at least two customer complaints. The customer complaints against Kosanke allege a number of securities law violations including that the broker made unsuitable investments and misrepresentations and false statements among other claims. The securities involved in the customer disputes are tenants-in-common (TICs).

Kosanke entered the securities industry in 1994. From 2000, until July 2006, Kosanke was registered with Questar Capital Corporation. From July 2006, until August 2010, Kosanke was associated with Professional Asset Management, Inc. Thereafter, from August 2010, Kosanke was registered with brokerage firm Concorde Investment Services, LLC.

As a background, TICs largely been sold unfairly as tax advantaged products that allow customers to defer capital gains taxes on appreciated real estate. TICs are private placements that have no secondary trading market and are therefore illiquid investments. In a typical TIC, the investor receives a fractional interest in the property along with other stakeholders and the profits are generated mostly through the efforts of the sponsor and the management company that manages and leases the property. The sponsor typically structures the TIC investment with up-front fees and expenses charged to the TIC and negotiates the sale price and loan for the acquired property. Because these fees are often higher than 15%, there is often no way for the investment to be profitable for the investor.

Gana LLP Investigation: Complaints Against Coastal Equities Broker Douglas Bevers

August 20, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Douglas Bevers (Bevers) has been the subject of at least five customer complaints, two regulatory actions, and one employment separation. The customer complaints against Bevers allege a number of securities law violations including that the broker made unsuitable investments, unauthorized trading, and churning (excessive trading), among other claims. The employment separation resulted from allegations that Bevers violated firm policies by allowing a third party to direct orders without obtaining permission from the client in writing.

Bevers entered the securities industry in 1973. From July 2003, until February 2014, Bevers was associated with Boenning & Scattergood, Inc. Thereafter, from February 2014, till present Bevers has been registered as a broker with Coastal Equities, Inc.

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. Many of the claims against Bevers involving claims of unauthorized trading, churning, and excessive trading.

Broker Investigation: Churning Claims Against Mark Kaplan

August 19, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Mark Kaplan (Kaplan) has been the subject of at least four customer complaints and one termination. The customer complaints against Kaplan allege a number of securities law violations including that the broker made unsuitable investments, churning (excessive trading), unauthorized trading, breach of fiduciary duty, misrepresentations and false statements, among other claims

Kaplan entered the securities industry in 1989. From September 2005, until June 2009, Kaplan was registered with Citigroup Global Markets Inc. (Citigroup). From June 2009, until April 2011, Kaplan was associated with Morgan Stanley Smith Barney (Morgan Stanley). In March 2011, Morgan Stanley filed a notice of Termination Form U-5 stating that Kaplan was discharged because of a customer complaint that was made against Kaplan. The firm also stated that it had other concerns regarding activity in client accounts. In response, Kaplan stated that the allegations by Morgan Stanley were unfounded and that the firm had approved all of the activity in client accounts. Since March 2011, Kaplan has been associated with Vanderbilt Securities, LLC.

All advisers have a fundamental responsibility to deal fairly with investors including making suitable investment recommendations. Many of the claims against Kaplan involving claims of churning and excessive trading. When brokers engage in churning the investment trading activity in the client’s account serves no reasonable purpose for the investor and is transacted to profit the broker through the generation of commission payments. 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.

FINRA Bars Former H.D. Vest Broker Richard Whitley

August 18, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Richard Whitley (Whitley) has been the subject of at least 13 customer complaints and one regulatory action that has resulted in Whitley being barred. FINRA launched an investigation into claims that Whitley recommended unsuitable investments to customers. In addition, to the regulatory bar from the agency, customer complaints against Whitley allege a number of securities law violations including that the broker made unsuitable investments, breach of fiduciary duty, misrepresentations and false statements, among other claims

Whitley entered the securities industry in 1982. From 1992, until August 2014, Whitley was registered with H.D. Vest Investment Services (HD Vest). In June 2015, Whitley was barred by FINRA from the financial services industry after failing to respond to the agencies investigation into claims

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: Citigroup Broker David Honingstock

August 18, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker David Honingstock (Honingstock) has been the subject of at least two customer complaints, two financial disclosures, and three judgments and/or liens. The customer complaints against Honingstock allege a number of securities law violations including that the broker made unsuitable investments, breach of fiduciary duty, misrepresentations and false statements, among other claims

In addition to these claims, Honingstock declared bankruptcy in October 2014 in New York. In addition, Honingstock former brokerage firm, Morgan Stanley, initiated an action against the broker alleging a debt of $1,635,123 owed to the firm that in a compromise settlement was reduced to $218,000. Honingstock has several other debts listed on his disclosures including a hospital bill from 2013, and a New York State Tax lien for over $17,000. A broker’s inability to manage his own finances or having trouble making ends meet may suffer from potential conflicts of interests in making recommendations to his clients.

Honingstock entered the securities industry in 1986. From January 2003, until May 2007, Honingstock was registered with UBS Financial Services, Inc. (UBS). Upon leaving from UBS, from May 2007, through June 2009, Honingstock was associated with Citigroup Global Markets Inc. (Citigroup). From there, Honingstock was associated with Morgan Stanley Smith Barney form June 2009, until December 2009. Finally, Honingstock has been registered with Citigroup since 2013.

FINRA Suspends Broker David Ledoux Over Failure to Disclose Certain Liens

August 12, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker David Ledoux (Ledoux) was recently fined and suspended by the regulator for failing to disclose certain liens on his registration. FINRA alleged that between May 1, 2006 and June 20, 2014, LeDoux failed to timely update his Form U4 to reflect the following six liens totaling $184,795.

In addition, to the recent regulatory action and judgement and liens, Ledoux has been the subject of one criminal event and six customer complaints. The customer complaint against Ledoux allege a number of securities law violations including that the broker made unsuitable investments, fraud, misrepresentation, and engaged in churning (excessive trading) among other claims.

LeDoux entered the securities industry in June 1994. From June 2001, to July 2014, LeDoux was associated with National Securities Corporation. At that time National Securities permitted LeDoux to resign due to his late reporting of liens. Since August 2014, LeDoux has been associated with Westpark Capital, Inc.