Articles Posted in Selling Away

Stoltmann Law Offices, P.C is investigating recent filings by both FINRA and Ameritas Investment Corp. regarding the sales practices of James F. Anderson of Dakota Dunes, South Dakota. Mr. Anderson also serviced clients through offices in Iowa and Nebraska. According to Mr. Anderson’s publicly-available FINRA BrokerCheck Report, Mr. Anderson was registered with Ameritas Investment Corp. from July 2004 until he was terminated by the firm for cause in February 2019. According to Ameritas, Mr. Anderson was discharged after the conclusion of an internal investigation which determined he had sold clients indexed annuities and promissory notes without authorization from the firm.  Not surprisingly, about two months later the first customer complaint appeared on Mr. Anderson’s BrokerCheck report, alleged that he sold $400,000 in promissory notes to the investor. Just this past week, on June 3, 2019, FINRA finally stepped in and barred Mr. Anderson from the securities industry for life. Mr. Anderson was technically barred for failing to respond to requests for information and to provide on-the-record (OTR) testimony pursuant to FINRA Rule 8210. Although the FINRA Acceptance, Waiver, and Consent does not reference his selling away activities, it does not take a grand leap of faith to conclude that his termination and the customer complaint specifically referencing selling away and selling promissory notes to clients was the crux of the investigation by FINRA. By refusing to show up and provide testimony, Mr. Anderson’s silence about his misconduct is deafening indeed.

Promissory notes are an all too common tool used by brokers and financial advisors to lure investor money into their pockets. First, it is important to understand that in almost all circumstances, promissory notes are securities, which means in order to be legal in your state, they must either be registered with the state securities department, or they must be exempt from registration. The exemption is still something that must be filed with the state. So, if your financial advisor wants to sell you a promissory note, or a loan agreement, or a “memorandum of indebtedness”, it does not really matter what they call it, functionally its the same: its a promissory note. Do yourself a favor and decline the offer and call your state securities department.  Stoltmann Law Offices has prosecuted dozens of cases involving “promissory notes”, many of which turned out to be Ponzi Schemes. Just recently, we have been litigating on behalf of investors who were sold promissory notes – called “Memorandum of Indebtedness” – in now bankruptcy 1 Global Capital.

The good news for investors who get swindled into investing in promissory notes, including those who bought them from Mr. Anderson, regardless of whether Ameritas says these were approved, Ameritas is legally bound to supervise the activities of all of its registered representatives.  Further, because a promissory note is a security, and because Mr. Anderson’s job through Ameritas was to provide financial advice and sell securities, Ameritas can be liable for Mr. Anderson’s conduct through what is called Respondeat Superior. This legal theory means that the principal (Ameritas) is responsible for the conduct if its agent (Anderson) performed within the scope of his employment (selling securities and providing investment advice).  So, for investors who purchased promissory notes through Mr. Anderson, you have two avenues of recovery against Ameritas and Stoltmann Law Offices urges you to call our Chicago-based law firm at 312-332-4200 to discuss filing a FINRA Arbitration claim to recover your losses.

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 and its securities arbitration practice group are investigating Jay Weiser of small-town Mendota, Illinois in LaSalle County in connection with serious allegations involving the sale of notes offered by Woodbridge and notes offered by Future Income Payments (FIP). Both of these entities have been exposed as Ponzi schemes. According to Mr. Weiser’s FINRA BrokerCheck Report, he was discharged with cause from DesPain Financial in connection with allegations he sold Woodbridge and FIP notes to investors. Mr. Weiser was then barred from the securities industry by FINRA on January 17, 2019 when he refused to provide information to FINRA pursuant to FINRA Rule 8210.  As we have discussed in previous blogs, there are various reasons why brokers refuse to provide “on the record testimony” (OTR) or provide documents in connection with a FINRA regulatory investigation pursuant to FINRA Rule 8210. Sometimes it is because a broker simply is no longer interested in being licensed and is making a career change and does not want to go through the hassle or the expense of complying with FINRA’s requests. Other times it is because submitting information or testimony to FINRA may do the broker more harm than good.  Here, given the allegations made by two clients against Weiser that he sold them notes in Woodbridge and FIP, it is reasonable to conclude Mr. Weiser voluntarily submitted to a lifetime ban from the securities industry because his misconduct is serious.

According to a Notice of Hearing filed the the Illinois Securities Department on November 5, 2018, Mr. Weiser, while affiliated with Weiser Financial and DesPain Financial, sold at least $611,000 in investments in FIP to at least six Illinois residents. According to the publicly available Notice, Mr. Weiser also sold at least $795,000 in Woodbridge notes to at least seventeen Illinois investors. According to the Illinois Securities Department, by selling interests in FIP and Woodbridge, Mr. Weiser violated numerous provisions of the Illinois Securities Law, including Section 12.A, Section 12.F, Section 12.G, Section 12.H, and Section 12.I.

The Notice of Hearing, along with the FINRA action, both find that Weiser failed to disclose these activities to his broker/dealer firm, DesPain Financial. It is critical not to confuse Weiser’s failure to disclose certain activities as if it in any way disclaims potential liability of DesPain or any other entity responsible for supervising Weiser, his firm, and his dealing with investors, because it does not. This failure to disclose does not alleviate the  regulatory, statutory, and common law responsibility to supervise the conduct of Mr. Weiser and specifically, if there are “red flags” present that Weiser was conducting investor business with FIP or Woodbridge, the burden would be on DesPain Financial to establish reasonable measures taken in reaction to these “red flags” of potential misconduct.

Did you invest in Selden Companies LLC at the recommendation of Ameriprise financial advisor John S. Elliot? If so, the FINRA arbitration process can be used to recover the losses you have incurred in Selden Companies LLC. Brokerage firms are required to reasonably supervise the activities of their financial advisors. “Selling away,” or the recommendation of an unapproved investment product by a financial advisor can make the brokerage firm liable for any investment losses sustained. We believe investors who invested in Selden Companies LLC have sustained a complete loss in their investment. Please call our Chicago-based investment fraud law firm at 312-332-4200 to learn about lawsuit and FINRA options for recovering these losses.

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