Articles Posted in Ameriprise Financial Services

Stoltmann Law Offices, a boutique securities, investment, and consumer fraud law firm in Chicago, has represented victims of fraud and Ponzi schemes since 2005, recovering tens of millions of dollars for out clients and restoring their financial security and freedom.  On September 9, 2022, it was reported that an Ameriprise financial advisor, Dusty Lynn Sternadel, was barred from the securities industry by FINRA for failing to cooperate with FINRA’s requests for information in connection with an investigation launched by the regulator.  The investigation stemmed from a regulatory filing made by Ameriprise wherein it stated it had terminated Sternadel for cause “for violation of company policies for misappropriation of client funds.”

The FINRA investigation into Sternadel did not get very far because she refused to cooperate with the regulator.  When financial advisors fail to cooperate with a FINRA investigation, FINRA Rule 8210 provides FINRA with the authority to essentially end the advisor’s career. The penalty for not cooperating with the regulatory investigation is harsh and brokers like Sternadel know this, yet she chose to take the lifetime ban instead of cooperate.  The FINRA AWC states that FINRA sent Sternadel a request to testify and produce documents, and that on August 30, 2022, during a phone call, Sternadel stated she would not cooperate or appear and understood the penalty for her refusal.

The Ameriprise disclosure regarding her termination is very vague, yet combined with the FINREA action, is disconcerting. According to the Ameriprise filing, Sternadel was terminated for cause for misappropriating (converting) client funds. Neither the Ameriprise termination notice nor the FINRA AWC state how much money was allegedly misappropriated or from how many Ameriprise customers. There are no customer complaints disclosed yet on Sternadel’s FINRA  Broker/Check Report.

Chicago-based Stoltmann Law Offices is representing investors who’ve suffered losses because their financial advisor recommended “private securities” without the permission or knowledge of their firms. It’s not unusual for financial advisors to pitch certain stocks that don’t have to follow the strict disclosure rules laid down by the Securities and Exchange Commission (SEC) and FINRA, the regulator of the US securities industry. But these “private” securities still need to be fully reviewed by brokerage firms to protect investors from excessive risk that they don’t want to take. There are multiple industry rules that dictate that brokers know their clients’ risk profiles.

FINRA suspended and fined former Ameriprise broker Jonathan M. Turner for allegedly selling securities in an un-named private company that involved two customers and transactions totaling $200,000. “Turner allegedly directed the customers to Company X and recommend that they invest in its securities, for which he provided certain forms,” FINRA says. Turner allegedly didn’t earn any commissions from the transactions, according to financialadvisoriq.com, “but participated in them without notifying Ameriprise in writing, against FINRA rules.”  Whether the advisor was paid a commission on the transaction is totally irrelevant.

In January 2020, the FINRA complaint adds, “Turner allegedly incorrectly certified to Ameriprise that he had not engaged in any private securities transactions not authorized previously by the firm.” This is extremely common and does not take Ameriprise off the hook.  For a generation, the SEC has warned brokerage firms like Ameriprise that they cannot simply take the broker’s they supervise word for it, to satisfy the firm’s supervisory obligations.

Stoltmann Law Offices is a Chicago-based investor rights law firm offering representation to defrauded investors on a contingency fee basis.  On February 24, 2022, the United States Securities and Exchange Commission (SEC) filed a civil complaint against Arthur Stewart Hoffman alleging he breached his fiduciary duty to several clients he recommended invest in an entity called Zima Global Ventures.  The SEC alleges that Zima Global was to pool investor money to then invest in a crypto-currency trading operation. Investors who put their hard-earned money into Zima as a result of the recommendation by Hoffman may have viable claims for recovery against Ameriprise Financial, the brokerage and investment advisory firm Hoffman was registered with at the time he made these solicitations.

According to his FINRA BrokerCheck Report, Hoffman was registered with Ameriprise from November 2016 until his termination for cause on May 13, 2020.  Two days after he was terminated, FINRA barred Mr. Hoffman from the securities industry for failing to cooperate and provide documents and information in response to a Rule 8210 request for information. Mr. Hoffman also filed for Chapter 7 bankruptcy protection in Arizona in May 2020. Importantly, on February 16, 2016, a customer filed a complaint against Hoffman which alleged a million dollars in damages in connection with securities fraud, breach of fiduciary duty, and fraudulent concealment. The regulator reports that this case was settled for $329,500, making it a very meaningful customer claim and supervisory issue for Hoffman moving forward.  Ameriprise should have kept Hoffman on a very short leash, but the facts seem to be, they allowed him to operate on a proverbial island where he was able to run an outside business and funnel Ameriprise client money to this Zima crypto-scam.

Brokerage firms like Ameriprise are legally responsible for supervising their financial advisors. Included in this mandate is to adequately supervise outside businesses, even if they are not disclosed, if red flags exist that the advisor is operating an outside entity. Here, Ameriprise clients invested money in Zima based on Hoffman’s solicitations.  Red flags do not get much more serious than that. Simply phone calls and monitoring of client accounts would have revealed that Hoffman was selling securities in an outside entity.  Ameriprise’s supervisory procedures were insufficient and not up to industry standards, which could make Ameriprise liable for negligence.

Chicago-based Stoltmann Law Offices continues to represent investors who’ve suffered losses in connection with financial advisors who have oversold energy stocks and other energy-related investments. With the COVID-19 pandemic depressing demand for everything from gasoline to jet fuel, it’s been a mostly rotten year for energy stocks. In fact, when news first hit the markets in early March, stocks in many oil & gas companies and funds that invested in them crashed. At one time, the Energy Select SPDR (XLE), an exchange-traded fund that invests in energy companies, was down as much as 58%.

The net effect of tens of millions of Americans sheltering in place, avoiding travel and not commuting slashed demand for fuels. Only a handful of people were getting on jets, buses, ships, trains, or driving to work. That resulted in energy companies eliminating dividends and losing money.  While the economy has recovered somewhat as more states have re-opened in recent months, energy demand is nowhere near where it was at the beginning of 2020. The U.S. economy is now in a recession, which may continue into 2021.

What is important to realize about oil/gas prices is, the decline in energy demand actually began a few years ago – primary energy consumption dropped by half in 2019 alone — hasn’t stopped brokers from selling investments in oil & gas companies. They have sold stocks, limited partnerships, and mutual funds that concentrate in fossil fuels, which are volatile commodities and have a long history or volatility.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses as a result of financial advisors who sell investments that are technically “unauthorized” by their firms. These side gigs, while profitable for the broker due to high commissions, are prohibited by FINRA, the industry regulator.

Brokers may pitch clients on a private securities transaction, for example. Of course, the investors rarely have any clue that what they are being asked to invest in is “unauthorized” or a “private securities transaction.” Sometimes these take the form of stock offerings that are unlisted. Broker Henry A. Taylor III, for example, then working for the Cetera brokerage firm, sold $30,000 in private stock that invested in a trucking firm. Taylor did not notify his firm of the sale and had initially deposited his client’s check in his personal account.

After a FINRA arbitration claim was filed, the regulator fined Taylor $7,500 and suspended him for three months earlier this year. Taylor neither admitted nor denied the findings of the FINRA action. The original transaction took place three years ago.

Chicago-based Stoltmann Law Offices has represented hundreds of investors who have been victims of one of the most egregious investment frauds: Ponzi schemes. These swindles promise quick riches and rely upon an increasing number of “investors” to keep the operation going, sometimes over a period of years. The schemes eventually blow up when new investors can’t be found to perpetuate it or promoters are outed by investors or associates for faking returns.

The most famous Ponzi scheme – and perhaps one of the largest – involved broker-money manager Bernie Madoff. Over a period of 17 years, Madoff defrauded thousands of investors, lying about profitable trades. In 2009, he was sentenced to 150 years in prison, after pleading guilty to a $65 billion swindle of some 65,000 victims around the world. Many of Madoff’s victims, which ranged from non-profit organizations to celebrities, were financially ruined. A court-appointed “Madoff Victims Fund” has distributed nearly $3 billion to investors. His sons, who worked for their father’s firm, turned Madoff into authorities when they learned of the scam.

Despite the notoriety of the Madoff swindle, Ponzi schemes are still ensnaring innocent investors. As one of the oldest investment fraud vehicles around, the Ponzi scheme has two selling points: Promoters promise outrageous returns in a short period of time and rely upon continuing stream of new victims to “pay off” early investors in fake profits. This perennial false promise of easy riches makes it one of the most durable schemes for dishonest brokers, who continue to sell them — until the frauds collapse.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with unscrupulous investment brokers selling exchange-traded products. Many of these high-risk products are unsuitable for retail investors.

With the COVID-19 crisis roiling financial markets, many investors have been sold products that rise when market indexes or individual securities fall. Many “exchange-linked products” (ETPs) often use borrowed money, or leverage, to magnify gains when the market drops, but they can also increase losses. They are generally only suitable for sophisticated investors and are linked to complex underlying futures contracts.

When the coronavirus crisis first made major headlines in the U.S. in early March, the stock, bond and commodities markets crashed. Since markets over-react to widespread greed and fear, traders went into mass selling mode over (later justified) expectations that demand for nearly everything from luxury goods to commodities would drop dramatically.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with unscrupulous investment brokers selling risky variable annuities.

Variable annuities are hybrid products that combine mutual funds within an annuity “wrapper.” As a retirement savings vehicle, you can invest in a variety of stock, bond and other funds that compound earnings tax free. Unlike “fixed” annuities, which pay a set rate of return and a guaranteed monthly payment, variables are not focused on guaranteed income and performance is based on market returns, so you could lose money. Both products provide a death “benefit,” that is, a lump-sum payment to survivors when the annuity holder dies.

The main reason variable annuities are often a bad deal for retirement investors is they are extremely expensive to own. In addition to sales commissions, mutual fund managers levy fees. There are also insurance-related expenses, riders, and other fees that act as a drag on return. Brokers often tout the tax “benefit” of owning a variable annuity, but then sell then to investors in their IRAs, which is a huge problem.

Chicago-based Stoltmann Law Offices  represents investors who’ve suffered losses from dealing with unscrupulous investment brokers. On April 28, 2020, the Financial Industry Regulatory Authority’s (FINRA) Department of Enforcement filed a complaint against an ex-Ameriprise representative, alleging he converted more than $42,000 of an elderly client’s funds for his own use. Sean Michael Refsnider, of Haddon Heights, New Jersey, was a representative at Ameriprise from 2012 until Aug. 20, 2019. The company stated he was fired after it concluded that his client’s funds were “misappropriated.” FINRA is the chief U.S. regulator of broker dealers.

According to the FINRA complaint, Refsnider allegedly “procured a check from `Customer A’ in the amount of $20,000 and then used the funds to pay his mortgage and other personal expenses.” Refsnider allegedly also had used a debit card linked to the client’s account to make purchases totaling about $17,317, in addition to $4,300 in cash withdrawals, the complaint said. Ameriprise said in a statement that it “quickly detected and stopped the activity, ensured the client was fully reimbursed, terminated the advisor and notified the proper authorities.”

In the past, Ameriprise has been cited by regulators for failure to protect customer assets. The U.S. Securities and Exchange Commission (SEC) fined Ameriprise $4.5 million in 2018 to settle charges “that it failed to safeguard retail investor assets from theft by its representatives.” According to the SEC’s order, five Ameriprise representatives “committed numerous fraudulent acts, including forging client documents, and stole more than $1 million in retail client funds over a four-year period.” The SEC also found that Ameriprise, a registered investment adviser and broker-dealer, “failed to adopt and implement policies and procedures reasonably designed to safeguard investor assets against misappropriation by its representatives.” The five Ameriprise representatives were based in Minnesota, Ohio, and Virginia, and three previously pled guilty to criminal charges. Each of the representatives was terminated by Ameriprise for misappropriating client funds and barred from selling securities by FINRA.

Stoltmann Law Offices has brought arbitration claims against dozens of brokerage firms like Ameriprise Financial, Merrill Lynch, Morgan Stanley, Wells Fargo, and JP Morgan Securities involving the unsuitable recommendations for investors to invest in oil and gas related securities.  In 2014 and 2015, we represented dozens of investors against various firms involving Master Limited Partnerships, or MLPs, which are almost always related to the oil and gas industry.  Then, during a big drop in the price of oil, a lot of oil and gas companies went into bankruptcy, dragging a lot of investor money with them.  History is repeating itself.

The price of oil has completely tanked in the last month. Even before the COVID-19 pandemic, the price of oil was being pressured by a price war involving Saudi Arabia, Russia, and OPEC.  Combined with the broad-based ongoing market crash, oil and gas investments – which are inextricably linked to the price of oil – have suffered catastrophic losses.  There are some well-know names on this list:

Goldman Sachs MLP and Energy Renaissance Fund – GER: Year to Date has dropped from 4.37 to 0.68 per share

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