Articles Posted in LPL Financial

Stoltmann Law Offices, P.C. continues to investigate investor claims and reports involving former Invest and LPL Financial  registered representative James T. Booth, of Norwalk, Connecticut, who was indicted on charges of securities fraud, wire fraud, and investment advisory fraud on September 30, 2019.  According to the unsealed indictment, Booth is alleged to have executed a Ponzi scheme which effectively converted almost $5 million from forty clients. The unsealed indictment was filed in the United States District Court for the Southern District of New York, Case No. 19-CRIM-699, and can be viewed here. Although Booth operated his own company called Booth Financial Associates, he was at all time relevant to this scheme a licensed and registered representative with FINRA member brokerage firms Invest Financial Corporation and LPL Financial.

As we previously discussed on this blog, James Booth was  terminated from LPL Financial on June 26, 2019 for allegedly converting $1 million from his clients. On July 1, 2019, Booth consented to a lifetime ban from the securities industry after FINRA investigated information provided to it by LPL established that Booth converted – or stole – $1 million from clients by depositing the funds into personal accounts for his own use. According to the FINRA Acceptance Waiver and Consent (AWC), Booth committed these alleged acts from approximately April 2014 to May 2019. Looking back, it appears that both LPL and FINRA underestimated the scope of this scam because the SDNY now alleges that Booth stole $4.9 million.

According to FINRA, numerous clients have filed complaints against Invest and LPL Financial to recover funds stolen by Booth. Some of these complaints have already been settled with full recoveries. FINRA Rules and securities industry regulations require brokerage firms like Invest Financial and LPL Financial to supervise their financial advisors. The foundation for this obligation to supervise to found in the Securities Exchange Act of 1934 which states:

Stoltmann Law Offices, P.C. is investigating claims regarding now former LPL Financial Advisor Kerry Hoffman, of Mundelein, Illinois. According to a complaint filed by the Securities and Exchange Commission on July 1, 2019, Hoffman along with a co-conspirator and convicted securities recidivist Thomas Conwell, sold investors securities in a company called GT Media, Inc. The SEC further alleges that the pair raised over $3.3 million from 46 investors, across twelve states. According to Hoffman’s FINRA BrokerCheck Report, he is currently registered as a financial advisor for Union Capital Company in Chicago, Illinois. On September 7, 2018, Hoffman was allowed to “resign” voluntarily from LPL Financial after more than 8 years with the firm. According to public filings, Hoffman’s “voluntary resignation” from LPL was in connection with raising money from clients for a private company. This wasn’t the first time Hoffman departed a place of employment under questionable circumstances. In 2007 he was discharged for cause from UBS Financial for unauthorized trading.

The allegations against Hoffman state that he sold approximately $850,000 in GT Media stock and promissory notes to five of his LPL clients. The SEC also alleges that Hoffman loaned funds to GT Media and was paid back using investor funds. The allegations made by SEC state that Hoffman failed to disclose conflicts of interest to clients to whom he sold GT Media securities and further failed to disclose he would be paid back on loans he provided to the company through investor funds.

What is really disconcerting about this scam is that Hoffman knowingly exposed his clients to Conwell and his company even though Conwell was sentenced to forty-eight months of prison time for wire fraud (see U.S. v Conwell, Case No. 03- Cr-334-1 (N.D. Ill.) and had been barred by the securities industry almost twenty years ago. (See In the Matter of Thomas V. Conwell, Exchange Act Rel. No. 43006, 72 SEC Docket 2011 (July 3, 2000).  Hoffman knew about Conwell’s past because the two have known each other since they were children.

Stoltmann Law Offices, P.C. is evaluating investor claims in connection with recently disbarred financial advisor Philip Nalesnik from Pottsville, Pennsylvania.  According to a document signed by Mr. Nalesnik on April 15, 2019, he voluntarily consented to a permanent bar from FINRA. This is a professional death sentence for anyone who wants to provide financial services or financial advice to clients. The Acceptance, Waiver, and Consent (AWC) states that Mr. Nalesnik refused to provide on-the-record testimony to FINRA in connection with its investigation into his outside business activities.  Prior to signing the AWC, according to his FINRA BrokerCheck Report, Mr. Nalesnik was terminated for cause by LPL Financial on July 8, 2018 as a result of LPL’s internal investigation into his outside businesses, including not cooperating with LPL’s investigation.

Mr. Nalesnik’s FINRA BrokerCheck Report reveals a few other troubling red flags.  He has been named in five customer complaints, with one of them resulting in an adverse arbitration award in November 2010.  He filed for Chapter 7 bankruptcy protection in January 2012 and more recently, was hit with two tax liens.  Financial troubles like these can be red flags or indications that a financial advisor could slip into various forms of misconduct, including selling away, where an advisor has investor-clients invest money in an outside entity without the formal authorization of his firm.

Mr. Nalesnik did prominently disclose several outside businesses on his CRD Report.  These include Ridgeview Wealth Management which was disclosed as a company through which Mr. Nelsnik sold non-variable insurance products.  He also disclosed Integrated Insurance Management, LLC which looks to be an insurance agency. Mr. Nalesnik also reports an affiliation with Private Advisor Group, LLC, which is a registered investment advisory firm headquartered in Morristown, New Jersey. Doing business with any of these entities would be required to be supervised by LPL Financial.

Stoltmann Law Offices, P.C. is investigating recent reports that James T. Booth, of Norwalk, Connecticut, was terminated from LPL Financial on June 26, 2019 for stealing upwards of $1 million from his clients. On July 1, 2019, Booth consented to a lifetime ban from the securities industry after FINRA investigated information provided to it by LPL established that Booth converted – or stole – $1 million from clients by depositing the funds into personal accounts for his own use. According to the FINRA Acceptance Waiver and Consent (AWC), Booth committed these egregious acts from approximately April 2014 to May 2019. If you or someone you know was victimized by Booth, you should contact Stoltmann Law Offices to discuss your legal options.

According to FINRA, Booth’s spree occurred while he was registered with Invest Financial Corporation and then LPL Financial. Depending on when an investor’s funds were actually converted by Booth, either Investment Financial or LPL Financial could be held responsible for this misconduct. In almost every case where a financial advisor like Booth converts or steals client money, there are various red flags and compliance failures that facilitate the theft. For example, in some cases, financial advisors will arrange for transfers of funds from a client account to a third party account, like an LLC or some outside business, from which the advisor then steals the money. In other cases, the advisor asks the clients to write a check or wire funds to either the advisor to a company he owns. In any instance, the brokerage firm’s knowledge of what their agent is up to is a phone call away. Part of a compliance department’s responsibility to supervise their agents includes making contact with clients directly to make sure they are satisfied with how their accounts are being managed and to inquire with them about their experience. It does not take a brilliant compliance examiner to figure out that a broker has been stealing money from clients for upwards of five years, like Booth.

FINRA Rules and securities industry regulations require brokerage firms like Invest Financial and LPL Financial to supervise their financial advisors. The foundation for this obligation to supervise to found in the Securities Exchange Act of 1934 which states:

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