unsuitable investments

Gregory Bray and Matt Maberry Under Investigation By FINRA For Unsuitable Security Sales

July 22, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) recently sanctioned supervisor Gregory Bray (Bray) concerning allegations that Bray failed to adequately supervise the firm’s chief executive officer and compliance officer Matt Maberry (Maberry), who FINRA refers to by the initials “MM”, concerning sales of certain complex products and recommendations of Class A mutual fund shares. In September 1996, Bray became registered with Alton Securities Group, Inc. (Alton Securities) where the alleged misconduct took place.

FINRA alleged that Bray was responsible for supervising the sales activity of Maberry. Maberry was responsible for all other supervisory functions at the Alton Securities. FINRA found that Bray’s supervision of Maberry’s sales activity consisted of a daily review of a trade blotter reflecting trades made by Maberry to customers together with conversations with Maberry regarding trading activity.

FINRA found that Maberry recommended and sold certain complex products to his customers. For example, FINRA found that Maberry recommended and sold leveraged or inverse exchange traded funds and leveraged/inverse mutual funds. In addition, Maberry is alleged to have recommended and sold a steepener note designed to increase in value as the gap between short and long term interest rates increased. FINRA found that Maberry’s sales were unsuitable because he lacked a reasonable basis to recommend these products to his customers because he did not fully understand the potential risks associated with these securities.

Broker Investigation: Robert Blake’s Sale of Tenants-in-Common (TIC) Real Estate Investments

July 10, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Robert Blake (Blake) has been the subject of at least six customer complaints, one criminal activity, and three regulatory actions. Customers have filed complaints against Blake alleging a number of securities law violations including that the broker made unsuitable investments, misrepresentations and false statements in connection with recommendations to invest in several different types of investments including private placements such as tenants-in-common (TICs) interests, variable annuities, and equity-indexed annuities.

Blake first became registered with a FINRA firm in 1974. From 2001 until November 2011, Blake was registered with Presidential Brokerage, Inc. Thereafter, Blake has been registered with Cambridge Investment Research, Inc. in the firm’s Greenwood Village, Colorado office. Blake operates out of business entity called Speer Wealth Management.

Both TICs and investment annuities have caused significant investment losses. The failure of the TIC investment strategy as a whole across the securities industry, TIC investments have virtually disappeared as offered investments. According to InvestmentNews “At the height of the TIC market in 2006, 71 sponsors raised $3.65 billion in equity from TICs and DSTs…TICs now are all but extinct because of the fallout from the credit crisis.” In fact, TICs recommendations have been a major contributor to bankrupting brokerage firms. For example, 43 of the 92 broker-dealers that sold TICs sponsored by DBSI Inc., a company whose executives were later charged with running a Ponzi scheme, a staggering 47% of firms that sold DBSI are no longer in business.

Broker Investigation: Kenneth McDonald’s Sale of Tenants-in-Common (TIC) Real Estate Investments

June 29, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Kenneth McDonald (McDonald) has been the subject of at least three customer complaints and one regulatory action. Customers have filed complaints against McDonald alleging a number of securities law violations including that the broker made unsuitable investments, misrepresentations and false statements in connection with recommendations to invest in private placements such as tenants-in-common (TICs) interests.

McDonald was a registered representative with Crown Capital Securities, L.P. from June 2003 through February 2013. Thereafter, McDonald has been registered with Newport Coast Securities, Inc.

TIC investments have come under fire by many investors. Indeed, due to the failure of the TIC investment strategy as a whole across the securities industry, TIC investments have virtually disappeared as offered investments. According to InvestmentNews “At the height of the TIC market in 2006, 71 sponsors raised $3.65 billion in equity from TICs and DSTs…TICs now are all but extinct because of the fallout from the credit crisis.” In fact, TICs recommendations have been a major contributor to bankrupting brokerage firms. For example, 43 of the 92 broker-dealers that sold TICs sponsored by DBSI Inc., a company whose executives were later charged with running a Ponzi scheme, a staggering 47% of firms that sold DBSI are no longer in business.

Michael Bell Suspended Over Misleading Private Placement Emails

June 25, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Michael Bell (Bell) has been the subject of at least 8 customer complaints, two financial disclosures, two firm terminations, and two regulatory actions. Customers have filed complaints against Bell alleging a litany of securities law violations including that the broker made unsuitable investments, unauthorized trades, breach of fiduciary duty, misrepresentations and false statements, churning, and fraud, among other claims. Some of these claims involve recommendations in penny stocks, private placements, and other speculative securities.

An examination of Bell’s employment history reveals that Bell 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 Bell’s 25 year career he has worked at 18 different firms.

Since 2008 Bell has been registered with Brewer Financial Services, LLC, Herbert J. Sims & Co. Inc., and most recently Westpark Capital, Inc. (Westpark) until July 2014.

Broker Michael Gates Alleged to Have Made Unauthorized Trades in Client Accounts

June 17, 2015 | by Staff Attorney

According to broker Michael Gates (Gates) Financial Industry Regulatory Authority (FINRA) BrokerCheck records the representative was recently sanctioned concerning allegations that from January 2011, through October 2011, he effected approximately 22 discretionary transactions for two firm customers without written authorization from the customers or approval from the firm.

Gates first entered the securities industry in September 1997. Thereafter, in April 2004, Gates became registered with Wells Fargo Advisors, LLC (Wells Fargo). In March 2012, Wells Fargo terminated Gates alleging that the broker may have entered mutual fund sales without authorization of his clients. After termination of his registration with Wells Fargo, Gates became registered with Morgan Stanley where he is currently registered. In addition, at least two customers have filed complaints against Gates alleging unsuitable investments, and excessive trading (churning).

NASD Rule 2510 prohibits brokers from exercising any discretionary power in a customer’s account unless there is written authorization and the account has been accepted by the member. FINRA alleged that Gates was not approved by his firm to exercise discretion in the customers accounts but nonetheless effected 22 discretionary transactions for two customers.

First Allied Securities Broker Daniel Grieco Sanctioned Over Non-Traditional ETF Sales

June 15, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) sanctioned broker Daniel Grieco (Grieco) concerning allegations that Grieco made recommendations of non-traditional exchange-traded funds (Non-Traditional ETFs) to various customers without having reasonable grounds to believe his recommendations were suitable.

Non-Traditional ETFs are behave drastically different and have different risk qualities from traditional ETFs. While traditional ETFs simply seek to mirror an index or benchmark, Non-Traditional ETFs use a combination of derivatives instruments and debt to multiply returns on underlining assets, often attempting to generate 2 to 3 times the return of the underlining asset class. Non-Traditional ETFs are also used to earn the inverse result of the return of the benchmark.

In addition, regular ETFs can be held for long term trading, but Non-Traditional ETFs are generally designed to be used only for short term trading. The use of leverage employed by these funds causes their long-term values to be dramatically different than the underlying benchmark over long periods of time. For example, between December 1, 2008, and April 30, 2009, the Dow Jones U.S. Oil & Gas Index gained two percent while the ProShares Ultra Oil and Gas, a fund seeking to deliver twice the index’s daily return fell six percent. In another example, the ProShares UltraShort Oil and Gas, seeks to deliver twice the inverse of the index’s daily return fell by 26 percent over the same period.

Regulators File Complaints Against Christopher Veale Concerning His Securities Practices

June 8, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Christopher Veale (Veale) has been the subject of at least 12 customer complaints, six judgment and lien of over $1,000,000 and five separate regulatory actions, two investigations by state regulators and one criminal matter involving a felony over the course of his career. Customers have filed complaints against Veale alleging a litany of securities law violations including that the broker made unsuitable investments, unauthorized trades, breach of fiduciary duty, misrepresentations and false statements, churning, and fraud, among other claims. Many of the claims involve recommendations in penny stocks and other speculative securities.

An examination of Veale’s employment history reveals that Veale 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 Veale’s 18 year career he has worked at 18 different firms.

Since 2008 Veale has been registered with Maximum Financial Investment Group, Franklin Christopher Investment Bankers, Inc., Brookville Capital Partners, Blackwall Capital Markets, Inc., Meyers Associates, L.P., John Thomas Financial, and Legend Securities, Inc., until February 2015.

Broker Complaint Investigation: David Persaud’s Sales Practices

June 6, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker David Persaud (Persaud) a/k/a Dwarka Persaud has been the subject of at least 5 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, and churning among other claims. Two of these customer complaints were filed recently.

An examination of Persaud’s employment history reveals that Persaud 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 Persaud’s 28 year career he has worked at 21 different firms.

Since 2008 Persaud has been registered with The Concord Equity Group, LLC, Andrew Garrett Inc., Garden State Securities, Inc., and since May 2015, Buckman, Buckman & Reid, Inc.

Broker Investigation: Patrick McGrath Former Oppenheimer & Co. Advisor

May 31, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Patrick McGrath (McGrath) has been the subject of at least four customer complaints, two regulatory actions, and one termination over the course of his career. Customers have filed complaints against McGrath alleging a litany of securities law violations including that the broker received loans and failed to pay the client timely, made unsuitable investments, and unauthorized trades, among other claims.

McGrath entered the securities industry in 1984 with brokerage firm Merrill Lynch, Pierce, Fenner & Smith Incorporated. Thereafter, from July 2003, until April 2009, 2007 through June 2009, McGrath was associated with brokerage firm Wachoiva Securities, LLC. Then, from April 2009 until January 2014, McGrath was a representative with Oppenheimer & Co. Inc. (Oppenheimer). Finally since February 2014, McGrath has been registered with Northeast Securities, Inc.

McGrath was permitted to resign from Oppenheimer in January 2014 due to his failure to finalize arrangements to repay money he borrowed from an Oppenheimer customer. There are also two regulatory actions against McGrath. One is a 30 day suspension and a $10,000 fine by the Florida Office of Financial Regulation based on allegations that McGrath engaged in prohibited business practices. FINRA also suspended McGrath for four months and fined him $10,000 concerning allegations that he borrowed money from a client contrary to Oppenheimer’s compliance policies that bar loan arrangements.

National Securities Broker Vito Balsamo Under FINRA Investigation Over V.W. Industries Sales

May 6, 2015 | by Staff Attorney

The Financial Industry Regulatory Authority (FINRA) has filed a complaint against broker Vito Balsamo (Balsamo) concerning allegations that Balsamo engaged in private securities transactions – also known as “selling away” – in ownership interests in a limited liability company called V.W. Industries, LLC (VWI) without first receiving written approval from his member firm. FINRA also alleged that Balsamo failed to provide testimony requested by FINRA staff.

According to the BrokerCheck records kept by FINRA Balsamo has been the subject of at least 4 customer complaints, 2 criminal matters, one regulatory action, and one judgment and lien over the course of his career. Customers have filed complaints against Balsamo alleging a litany of securities law violations including that the broker made unsuitable investments, unauthorized trades, breach of fiduciary duty, misrepresentations and false statements, and churning, among other claims. The claims involve different investment recommendations including claims involving equity securities among other speculative securities.

Balsamo entered the securities industry in 1991. From 1999 until May 2008, Balsamo was associated with Joseph Stevens & Company, Inc. Thereafter, from April 2008, until February 2012, Balsamo was associated with National Securities Corporation (National Securities).