Articles Tagged with unsuitable recommendations

shutterstock_186180719-300x216The securities lawyers of Gana Weinstein LLP are investigating customer complaints against former LPL Financial LLC (LPL Financial) Broker Daniel Pugel (Pugel). According to BrokerCheck records, in March 2017, Pugel was “permitted to resign” from Financial Advocates Investment Management after allegedly violating investment-related statutes, regulations, rules, and/or industry standards of conduct, including FINRA Rule 2310 (suitability). Pugel has received three customer complaints.

In 2016 a customer alleged Daniel Pugel, while employed at Financial Advocates Investment Management, made unsuitable investment recommendations, failed in his supervisory duties, breached his fiduciary duty, and violated blue sky laws. The complaint settled in 2017 for $215,000.

In 2004 a customer alleged Daniel Pugel, while employed at Morgan Stanley, breached of contract, breached his fiduciary duty, made unsuitable recommendations, and committed fraud in connection to a mutual fund investment. The complaint resulted in an award to the customer of more than $95,900.

shutterstock_179921270The securities lawyers of Gana Weinstein LLP are investigating customer complaints filed with The Financial Industry Regulatory Authority’s (FINRA) against broker Honetta Kao (Kao). According to BrokerCheck records Kao is subject to two customer complaints, one regulatory action, onr investigation, and one financial matter.

FINRA terminated Kao after the broker failed to respond to a letter request for information in August 2015. Prior to that time, in January 2015, FINRA opened an investigation into Kao alleging potential willful violations of securities fraud laws and FINRA rules. In addition, in April 2015, a customer filed a complaint alleging that Kao mishandled the account and provided bad advice. The complaint is pending. Another client alleged in May 2013, that Kao engaged in unsuitable recommendations and unauthorized trading.

Brokers have a responsibility 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. First, there must be reasonable basis for the recommendation the product or security based upon the broker’s investigation and due diligence into the investment’s properties including its benefits, risks, tax consequences, and other relevant factors. Second, the broker then must match the investment as being appropriate for the customer’s specific investment needs and objectives such as the client’s retirement status, long or short term goals, age, disability, income needs, or any other relevant factor.

shutterstock_175993865The securities lawyers of Gana Weinstein LLP are investigating investors that were recommended to invest in preferred stock issued by RCS Capital Corporation (RCS). According to the Wall Street Journal, RCS Capital plans to file for chapter 11 bankruptcy protection under a prearranged that will allow RCS to focus on its retail brokerage firm conglomerate Cetera Financial Group. As part of the planned deal lenders agreed to invest $150 million in new working capital into Cetera. Also according to the plan, the company expects debt reduction and the elimination of preferred stock worth more than $500 million.

Our firm is investigating potential unsuitable recommendations in RCS preferred stock. Before recommending investments brokers and advisors must ensure that the investment is appropriate for the investor and conduct due diligence on the company in order to understand the risks and prospects of the company. With a company as troubled and opaque as RCS, investors likely relied upon the due diligence of their advisors in making investments in the company.

The issuance of large amounts of preferred stock coincided with the downfall of RCS and was an extremely risky investment. As a background chronicled by InvestmentNews, in the fall of October 2013, Nicholas Schorsch, the owner of RCS and many of its affiliates, had capped off a string of acquisitions in just two years costing $8.8 billion in total and forging a giant non-traded REIT and broker-dealer conglomerate.

The law offices of Gana Weinstein LLP recently filed a complaint against RBC Capital Markets, LLC (RBC) and Morgan Stanley Smith Barney, LLC (Morgan Stanley) accusing their registered representative Bruce Weinstein (Weinstein) of churning (excessive trading) and making unsuitable recommendations. In addition, the complaint alleged that the brokerage firms failed to properly supervise Weinstein’s activities.

The claimant alleged that he is the owner of a small business who had very little investment experience with stocks, bonds, or any other investment products.  In addition, the claimant has no other financial or investment training and is generally unsophisticated in financial matters.  The complaint also alleged that Weinstein knew that the claimant was providing the broker with approximately 100% of his liquid assets.  The claimant alleged that even though he did not tell the broker that he desired to speculate with 100% of his liquid assets, Weinstein incorrectly marked claimant’s investment objective as speculation.  Claimant alleged that the broker also incorrectly selected his investment experience in options, stocks, and bonds as being 20 years.  In fact, the claimant had no options trading experience.

According to the complaint, Weinstein immediately began executing a highly leveraged and excessive trading investment strategy in claimant’s account.  The claimant alleged that Weinstein’s trading was made without authorization or prior notice to the client.  The claimant alleged that the broker’s trading generated exorbitant commissions for himself while providing no material benefit to his client.  For example, in the May 2011, the claimant alleged that his account lost 44.8% of its value in a single month.  During this month, it was alleged that the broker excessively day traded options such as Apple causing losses of $23,228 in Apple options or nearly 21% of the claimant’s entire liquid net worth.

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