unsuitable investments

Broker Investigation: Aegis Capital Financial Advisor Michael McDonald

November 2, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Michael McDonald (McDonald) has been the subject of at least 5 customer complaints. Customers have filed complaints against McDonald alleging securities law violations including claims of churning and excessive trading, unsuitable investments, excessive commissions, unauthorized trading, breach of fiduciary duty, and fraud among other claims. In 2011, a customer complained that McDonald recommended a private placement leading to $450,000 in damages. In 2008, another customer also complained that McDonald recommended a private placement called Xyience, Inc which caused $450,000 in damages.

McDonald entered the securities industry in 1993. From November 2005, until February 2011, McDonald was registered with JHS Capital Advisors, Inc. Since February 2011, McDonald has been associated with Aegis Capital Corp. out of the firm’s Maitland Florida office location.

All advisers have a fundamental responsibility to deal fairly with investors including 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 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 Investigation: Claims Against Broker Glen Delaney

October 31, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Glen Delaney (Delaney) has been the subject of at least 2 customer complaints and 3 judgements or liens. Customers have filed complaints against Delaney alleging securities law violations including unauthorized trades, breach of fiduciary duty, and unsuitable investments among other claims. In addition, Delaney has had difficulty managing his own finances and on August 13, 2015, disclosed a civil judgment of $50,225, on November 19, 2010, disclosed a civil judgement of $9,720, and in 2006 had a civil judgement of $600. Judgements are often a sign that the broker cannot manage their own personal finances and may be tempted to recommend high commission products or strategies to clients in order to satisfy debts.

Delaney entered the securities industry in 2005. Since 2008 Delaney has been registered with Pointe Capital, Inc., until June 2009. From June 2009, until October 2010, Delaney was registered with Global Arena Capital Corp. Thereafter, from October 2010, until April 2012, Delaney was associated with Brookstone Securities, Inc. From April 2012, until June 2015, Delaney was a registered representative of Rockwell Global Capital LLC. From June 2015, until August 2015, Delaney was registered with Primary Capital, LLC. Finally, since August 2015, Delaney has been associated with Craig Scott Capital, LLC out of the firm’s Uniondale, New York office location.

All advisers have a fundamental responsibility to deal fairly with investors including 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 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: Claims Against Broker John Lopinto

October 31, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker John Lopinto (Lopinto) has been the subject of at least two customer complaints. The customer complaints against Lopinto allege securities law violations that claim churning and excessive trading, unsuitable investments, excessive commissions, breach of fiduciary duty, and fraud among other claims. One complaint alleged that Lopinto caused $4,000,000 in damages. In another claim filed the customer alleged $1,000,000 in damages as a result of high risk private placements and account churning.

Lopinto entered the securities industry in 2002. From January 2007 until January 2009, Lopinto was associated with Pointe Capital, Inc. From January 2009 until February 2010, Lopinto was associated with National Securities Corporation. Thereafter, from February 2010, until August 2011, Lopinto was associated with J.P. Turner & Company, L.L.C. Finally, since August 2011 onward Lopinto has been associated with Legend Securities, Inc. out of the firm’s New York, New York office location.

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.

FINRA Investigates Broker Craig Taddonio Over Supervision and Churning

October 29, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Craig Taddonio (Taddonio) has been the subject of at least three customer complaints, three judgements or liens, and one regulatory investigation. The Customer complaints against Taddonio alleges securities law violations that claim churning and excessive trading, unsuitable investments, securities fraud, and excessive commissions among other claims. The most recent complaint filed in April 2015, alleges losses of $900,000. In addition, in May 2015, a customer was awarded $338,454 in an arbitration claim including Taddonio where the panel assessed $107,944, $9,871, and $220,639 in compensatory damages against Taddonio and others jointly and severally and also a finding of punitive damages against Taddonio and others jointly and severally under New York law.

In addition to customer complaints Porges is subject to several liens including a massive $574,055 tax lien in February 2015, a $57,735 tax lien in September 2014, and a $48,607 tax lien in September 2014. Tax liens and judgements are often a sign that the broker cannot manage their own personal finances and may be tempted to recommend high commission products or strategies to clients in order to satisfy debts.

Finally, the brokercheck record also states that on September 29, 2015, FINRA initiated an investigation into Taddonio conduct. The investigation relates to false statements and testimony, violations of FINRA’s supervisory rules and churning.

FINRA Investigates Broker Brent Porges Over Supervision and Churning

October 28, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Brent Porges (Porges) has been the subject of at least four customer complaints, six judgements or liens, and one regulatory investigation. The Customer complaints against Porges alleges securities law violations that claim churning and excessive trading, unsuitable investments, securities fraud, and excessive commissions among other claims. The most recent complaint filed alleges losses of $900,000. In addition, in May 2015, a customer was awarded $338,454 in an arbitration claim including Porges where the panel assessed $107,944 against Porges and others jointly and severally and also a finding of punitive damages against Porges and others jointly and severally under New York law.

In addition to customer complaints Porges is subject to numerous liens including a $7,500 tax lien in March 2015, a $9,000 tax lien in February 2014, a $64,000 tax lien in August 2013, a $5,200 tax lien in December 2012, among other liens. Tax liens and judgements are often a sign that the broker cannot manage their own personal finances and may be tempted to recommend high commission products or strategies to clients in order to satisfy debts.

Finally, the brokercheck record also states that on September 29, 2015, FINRA initiated an investigation into Porges conduct. The investigation relates to false statements and testimony, violations of FINRA’s supervisory rules and churning.

Customers File Complaints Against Eric Wegner Over Tenants-in-Common (TIC) Real Estate Investments

October 26, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Eric Wegner (Wegner) has been the subject of at least 5 customer complaints and two financial disclosures. Customers have filed complaints against Wegner alleging a number of securities law violations including that the broker made unsuitable investments, misrepresentations, breach of fiduciary duty, and false statements mostly in connection with recommendations to invest in private placements such as tenants-in-common (TICs) interests. In addition, one complaint involves a dispute over a variable annuity recommendation.

Wegner entered the securities industry in 2000. From December 2002, until December 2008, Wegner was a registered representative with Sammons Securities Company, LLC. Thereafter, from January 2009, until February 2011, Wegner was associated with QA3 Financial Corp. From February 2011, until July 2013, Wegner was associated with Sigma Financial Corporation. Finally, Wegner is currently a registered representative with Cambridge Investment Research, Inc. out of the firm’s Delafield, Wisconsin office location.

TIC investments have led to devastating investor losses and are in almost all cases unsuitable products. The near certainty of failure of investing in TICs as a whole has led to the product virtually disappearing as an offered investment from most reputable brokerage firms. 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.

FINRA Suspends Broker Lucian Hodgman Over Misleading Advertising and Dishonest Statements

October 26, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Lucian Hodgman (Hodgman) has been the subject of at least 4 customer complaints, 4 regulatory action, and three employment terminations. Customers have filed complaints against Fladell alleging securities law violations including churning and excessive trading, unsuitable investments, and unauthorized trades among other claims.

Nearly all of the regulatory actions and brokerage firm terminations revolve around allegations of dishonest conduct. For instance in 2001, UBS Financial Services Inc. (UBS) discharged Hodgman stating that he mpurchased a mutual fund in a client’s account without the client’s authority. In April 2002, the NASD alleged that Hodgman effected transactions in a customer’s account without the customer’s knowledge. In 2013, brokerage firm Moors & Cabot, Inc terminated Hodgman stating that the broker failed to cooperate with the firm’s investigation of marketing materials that were sent out to customers without the firm’s knowledge or approval. Thereafter, in December 2013, the Maine Office of Securities alleged that Hodgman made false statements in a record filed with the office in connection with his application to apply to the brokerage firm, Investors Capital Corp. In March 2014, Investors Capital Corp. discharged Hodgman stating that the firm determined that Hodgman was not truthful to the Maine Office of Securities. Thereafter, the state of Massachuestts initiated an action against Hodgman concerning his advertising in the state.

With this history in mind in June 2015, FINRA suspended Hodgman for 18 months alleging that between May and July 2013, Hodgman caused approximately 40,000 copies of advertisement postcards to be sent out through a third-party marketing company without approval of Moors & Cabot. According to FINRA, the postcards contained information about investing in fixed annuities that violated industry standards by failing to provide a sound basis for evaluating an investment in fixed annuities. In addition, FINRA alleged that in July and August 2013, Hodgman falsely represented to his firm that the marketing company had mailed the postcards prematurely and without Hodgman’s knowledge or authorization. To bolster this story, FINRA claims that Hodgman made a telephone call to a Moors & Cabot compliance officer impersonating a representative of the marketing company.

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

October 20, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Robert Horning (Horning) has been the subject of at least 8 customer complaints. Customers have filed complaints against Horning alleging a number of securities law violations including that the broker made unsuitable investments, misrepresentations, fraud, breach of fiduciary duty, and false statements in connection with recommendations to invest in private placements such as tenants-in-common (TICs) interests, direct participation programs and limited partnerships which include investments like oil & gas, non-traded real estate investment trusts (Non-Traded REITs), and equipment leasing programs.

Horning entered the securities industry in 1993. From November 2004, until July 2009, Horning was a registered representative with Direct Capital Securities, Inc. Thereafter, since July 2009, Horning has been associated with Centaurus Financial, Inc. (Centaurus) out of the firm’s Los Angeles, California office location.

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.

Former B.B. Graham & Company Broker Russell Macke Barred For Failing to Respond to Regulator Requests

October 20, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Russell Macke (Macke) has been the subject of at least 5 customer complaints, 2 regulatory actions, and 2 employment terminations, and 7 judgment or liens. Customers have filed complaints against Macke alleging securities law violations including poor investment performance, churning and excessive trading, unsuitable investments, and investment fraud among other claims. The judgment and liens include a $38,000 tax lien, a $108,000 tax lien, a $105,000 tax lien, a $1,500 tax lien, a $110,000 tax lien, a $24,000 tax lien, and a $14,000 tax lien. Macke was terminated by John Hancock in 1998 due to claims that the firm was unable to supervise him. In 2012, Macke was terminated from Forsyth Securities, Inc. due to a Missouri consent order and pending FINRA inquiry.

One of the regulatory actions brought against Macke by FINRA alleged that the broker took advantage of his discretionary authority over two customer accounts by engaging in excessive trading and use of margin in those accounts. FINRA found that Macke caused both customers to pay excessive margin interest, commissions and fees and that the amount of trading in the accounts was inconsistent with the customers’ financial circumstances and investment objectives.

One of the customers was alleged to have opened a brokerage account at Forsyth and was 85 years old and living in a nursing home and the account balance was $390,558. The customer used money from the account to pay health care and living expenses. FINRA found that the customer withdrew $55,923 to pay expenses and that Macke was aware of the customers’ use of the account and these withdrawals. The account forms listed annual income of $60,000, a net worth of $600,000, and liquid assets of $380,000. The account form’s risk tolerance was noted as moderate and the investment objectives were growth and income and trading and speculation.

Broker Investigation: St. Bernard Financial Broker Joseph Miles

October 19, 2015 | by Staff Attorney

According to the BrokerCheck records kept by Financial Industry Regulatory Authority (FINRA) broker Joseph Miles (Miles) has been the subject of at least 3 customer complaints, 3 judgements or liens, and one bankruptcy discharge. Customers have filed complaints against Miles alleging securities law violations including poor investment performance, unsuitable investments, securities fraud, and breach of fiduciary duty among other claims. Most of the claims against Miles relate to bonds or other debt obligations that caused losses. For instance, the latest complaint alleged damages of $169,865 as a result of bonds that lost value in 2013. In addition, Miles has had difficulty managing his own finances having been through a bankruptcy in 2005. Thereafter, Miles has had three judgments filed against him for taxes in the amounts of $5,499, $27,241, and $7,900.

Miles entered the securities industry in 1983. Since May 2004, Miles has been associated with St. Bernard Financial Services, Inc. out of the Russellville, Arizona office location.

All advisers have a fundamental responsibility to deal fairly with investors including 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 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.