Articles Posted in Fines

LPL terminated financial advisor Dain F. Stokes on August 28, 2019 for selling unregistered promissory notes to clients that purported to invest in a project in Africa allegedly sponsored by Taylor Swift. According to InvestmentNews, Stokes converted at least $576,000 from two clients, whom he solicited to invest in this phony charity project, which he sold as being created by Swift to help needy people in Africa. Stokes claimed to have a close relationship with Swift, telling clients that she personally hired him to manage the finances of the Africa project and to promote a new song release by her in June 2019. He also told clients that Bill Gates was involved in the project.

The State of New Hampshire Department of State Bureau of Securities Regulation filed a petition and order against Stokes after an investor (“Investor #1”) invested $201,000 in the Africa Project between August 1, 2018 and January 25, 2019. Stokes used promissory notes to facilitate these investments. According to the promissory notes, Investor #1 would receive the return of his entire principal plus 20% interest by making this investment. Payment on the first promissory note was initially due by November 8, 2018, however the due date was continually pushed back by Stokes. At one point, he even told his client that President Donald Trump allegedly froze his assets. Stokes was ordered to pay $201,000 plus interest in restitution to Investor #1 and a $20,000 fine for violating New Hampshire Blue Sky Laws, which prohibit the fraudulent sale of securities (RSA 421-B:5-501) and the sale of unregistered securities (RSA 421-B:3-301(a)). To date, a second investor who invested $375,000 has come forward.  The New Hampshire Department of State Bureau of Securities Regulation has since frozen Stokes’ assets and issued an injunction prohibiting him from speaking with those who invested in this scam.

New Hampshire authorities interviewed Stokes, who refused to provide any details about the African charity, claiming that all information, including the name, was privileged. He also refused to reveal whether the checks, which were made payable to him personally, were invested in his personal accounts.

On August 5, 2019, FINRA fined Morgan Stanley registered representative Ken Kavanagh $25,000 and suspended him from practicing in the securities industry for eighteen after discovering that he concealed his outside business activity. According to FINRA’s order, beginning in 2003, Kavanagh provided personal management services to professional athletes. In October 2007, he registered his business as CEO-Sports in New Jersey, then formed another LLC in Pennsylvania, MGMT LLC. His services included coordinating travel and dinner arrangements, housing, bill payment, opening and managing bank accounts, and referrals to other professionals for tax return preparations and wills. Kavanagh had approximately 42 clients and generated at least $5 million in fees from 2012 through 2018 for providing these services.

FINRA Rule 3270 (formerly NASD Rule 3030) prohibits FINRA financial advisors from engaging in outside businesses unless they are properly disclosed to and approved by the advisor’s  brokerage firm. Mr. Kavanagh did not disclose his interest in MGMT or CEO-Sports to Morgan Stanley. He also attested in annual questionnaires required by Morgan Stanley that he was not involved with any outside business activities. He named a close relative as the sole owner or member of MGMT and CEO-Sports and also as the authorized representative on the each company’s bank accounts.  As a result of these FINRA Rule violations, FINRA fined Kavanagh $25,000 and suspended him for eighteen months.

As Stoltmann Law Offices previously alerted investors, Kavanagh has not been registered in the securities industry since resigning from Morgan Stanley in April 2018 after a client complained of his undisclosed outside business activities. On August 15, 2018, a customer also complained that Kavanagh placed unauthorized trades and forged documents.

The Financial Industry Regulatory Authority (FINRA) is investigating Houston-based Monex Securities and Moody Securities. FINRA alleged that Monex Securities was “charging excessive mark-ups and mark-downs on foreign bond transactions,” and the firm entered into a Letter of Acceptance, Waiver and Consent (AWC) with the regulatory body. FINRA went on to state that “the charges were not fair and reasonable, taking into consideration all relevant factors, including the individual prevailing market prices and resulted in $2,227.02 in excessive charges to customers. The firm has reimbursed the affected customers.”

In December, FINRA ordered Monex to pay $1.1 million in disgorgement of commissions, plus interest, obtained by unregistered foreign individuals who sold securities on the firm’s behalf and an additional $175,000 for “failing to register the foreign representatives and for related supervisory deficiencies over a period of two and a half years.” Moody submitted an AWC to FINRA after they ordered the firm to pay $350,000 to the investors in a public offering of securities of the firm’s affiliated real estate investment trust in restitution. A FINRA notice stated that Moody “violated FINRA rules governing underwriting compensation by acting as the wholesaling dealer-manager for the offering of interests in a REIT, in which the underwriting compensation exceeded 10 percent of the offering’s gross proceeds and that their written supervisory procedures were inadequate in that they failed to provide guidelines to monitor organization and offering expenses or underwriting compensation, as the offering progressed and remained open.”

If you invested money with Monex Securities or Moody Securities, you may be entitled to recover your investment losses. Stoltmann Law Offices can help. Our number is 312-332-4200. We are securities lawyers who concentrate on recovering investment losses in the FINRA arbitration process.

 

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