Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with broker-advisors affiliated with the Cetera financial group.  The securities regulator FINRA recently fined three Cetera Financial Group broker-dealers $1 million, claiming that Cetera’s “supervisory systems and procedures were deficient when handling securities transactions.”

Like many advisory firms, Cetera employs representatives who are “dually registered,” meaning they are broker-dealers and registered investment advisers. In the Cetera case, their representatives managed more than $80 billion in assets across 47,000 accounts. According to U.S. Securities and Exchange Commission (SEC) exams conducted in 2013, 2015 and 2017, Cetera was “aware of the supervisory deficiencies.”

Without admitting or denying the allegations, Cetera recently signed a FINRA letter of Acceptance, Waiver, and Consent and agreed to FINRA’s sanctions, which included a censure and an agreement that they would review and revise, as necessary, systems, policies and procedures related to the supervision of dually-registered reps’ securities transactions, according to ThinkAdvisor.com.

Chicago-based Stoltmann Law Offices has represented scores of senior investors who’ve suffered losses from dealing with brokers who’ve sold them inappropriate investments. It’s a story we’ve seen all too often: A senior investor is “befriended” by a broker, who then sells them investments that are extremely risky and lose money. Before they know it, their nest egg is scrambled.

Regulators and consumer watchdogs have been trying to protect seniors for decades from rapacious brokers, advisors and insurance agents. The industry police are outnumbered by hundreds of thousands of salespeople selling anything from junk variable annuities to exchange-traded products that generate high commissions for the brokers while fleecing investors’ investment accounts.

Under a relatively new rule from FINRA, the securities industry regulator, older investors may garner somewhat more protection from unscrupulous advisors and brokers. It will provide a safeguard against broker-advisors from gaining entrees into their financial affairs through various vehicles. “FINRA Rule 3241 limits the ability of a broker-dealer to be named as a beneficiary, executor, trustee, or power of attorney for one of their customers,” according to The National Law Review. “Broker-dealers must provide written notice to their firm, and the firm must assess the situation and determine whether to approve or disapprove of the fiduciary relationship.”

Stoltmann Law Offices, P.C. has represented investors in arbitration claims against brokerage firms involving non-traded REITs hundreds of times. We understand these products better than the brokers who sell them, which is what makes us effective advocates for our clients. If you invested your hard-earned money in the NorthStar Healthcare REIT and would like to discuss your options to recover your investment losses, please contact Stoltmann Law Offices at 312-332-4200.

On December 23, 2020, it was reported that the NorthStar Healthcare REIT was reducing its share price from $6.25 to $3.89. The facts on the ground for this non-traded REIT do not portend well for investors. According to published reports, the REIT retained a valuation expert to determine how the REIT can get out of the debt it is buried in. Unfortunately, the value of the REITs portfolio is only $1.6 billion but cost $2.2 billion.

Non-Traded REITs are the darlings of brokers and financial advisors. They are perfect investments from their perspective. They offer huge selling commissions, are not “volatile” because they do not trade on the open market, and offer a high income rate. Brokers do not need to “manage”  a position in a non-traded REIT like they do a well-managed portfolio. Even though they get paid 7X more for selling a non-traded REIT than they do for managing an account, (1% fee versus 7% commission), brokers love non-Traded REITs because they get to sell it and forget it.  The investor is left holding the bag when the REIT stops paying distributions, freezes redemptions, and cuts the share price by 70%. Then once the investor looks a little closer, you come to realize that “dividend” you’ve been paid all of these years was actually, mostly, just a return of your money – the REIT takes your money, shells out at least 10% for commissions and fees, puts the rest of it into its real estate portfolio, then shells out distributions that are mostly your own money given back to you.

Stoltmann Law Offices, P.C. is a Chicago-based investor rights law firm that offers representation nationwide on a contingency fee basis. We represent investors that lose money in bad investment products like Watermark Lodging Trust REIT in cases against brokerage firms and investment advisers. If you or someone you know has suffered investment losses in Carey Watermark n/k/a Watermark Lodging Trust REIT, please contact Stoltmann Law Offices for a no-obligation, free initial consultation.

In late November, Watermark Lodging Trust REIT reported its “NAV” or “Net-Asset-Value” as $5.51 per Class A share and $5.45 per Class T share. When this REIT was sold to investors, the NAV was $10 per share. Investors are looking at a loss on their December statement of nearly 50% of their principal investment. The Watermark Lodging Trust REIT was previously known as the Carey Watermark Investor and Carey Watermark Investors 1 REITs, which merged in April 2020.

If investors try to sell their shares on the secondary market, the bids are as low as $3 per share. Watermark Lodging REIT concentrates its real estate portfolio in hotels/hospitality which has been devastated this year by the COVID-19 pandemic. Although it is easy to blame the pandemic for these losses, an excuse brokers will certainly rely on, the fact is, this REIT has always been a high risk, speculative investment that concentrated investor money in a few properties in one narrow sector of the real estate world; hotels.  Non-Traded REITs are sold, not bought, by investors because financial advisors and brokers receive massive sales commissions for selling them.  These are “alternative” investments that offer higher income rates on paper, but in reality, usually distributed your own money back to you as a “distribution” and rarely generate enough income from the underlying portfolio to sustain their distribution rates. Most non-traded REITs are heavily indebted so that they can use debt to pay distributions to keep the flow of investor money coming in.

Chicago-based Stoltmann Law Offices has represented athletes who’ve suffered losses from dealing with broker-advisors who have fleeced them. Just because a person is a professional athlete and makes tens of millions of dollars for playing a sport doesn’t mean they are financially sophisticated. Far too many great athletes fall prey to con men and advisors who rip them off.

Sadly, there’s a long list of athletes who’ve been defrauded by advisors. Some have achieved great fame in their sports such as boxer Mike Tyson, pitcher CC Sabathia, NBA great Kareem Abdul Jabbar and quarterbacks John Elway and Bernie Kosar. Sometimes all it takes is one crooked advisor to do a lot of financial damage. For example, major league pitchers Jake Peavy and Roy Oswalt and Quarterback Mark Sanchez had three things in common: They were well-paid athletes and shared the same financial advisor. Ash Narayan, an Irvine, California-based advisor with RGT Capital Management, pleaded guilty to defrauding the stars of some $30 million. Narayan was forced to pay nearly $19 million in restitution and serve 37 months in prison.

How were these pros swindled? Prosecutors stated that “from December 2009 to early 2016, he advised his clients to invest in a money-losing online sports and entertainment ticket company in Illinois (The Ticket Reserve, Inc.) without telling them that he was on the board, or that it was a risky and unprofitable business,” according to The Los Angeles Times.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with brokers who have failed to recognize their clients’ need for lower-risk portfolios. It’s no secret that the COVID pandemic has made the stock and bond markets more volatile. When the outbreak first hit markets, it triggered a massive sell-off in everything from blue chip stocks to municipal bonds.

Yet many broker-advisers failed to protect their clients, keeping them in high-risk portfolios that lost money. Even though they constantly make claims to the contrary, almost no advisor can time markets to fully protect investors. Few saw the pandemic coming, or the devastating impact it would have on the world economy.

After the stock market peaked on February 19, 2020, it dropped 34% in a month, hitting a bottom on March 23. But by June, the market had bounced back, surging 39%. Then, on Oct. 28, the Dow dropped more than 900 points as COVID cases again surged worldwide in a second, record-setting wave. Who could have predicted such stomach-churning volatility? Investors who were risk averse and needed to protect principal – and were overexposed to stocks – got burned the most.

Chicago-based Stoltmann Law Offices has represented professional athletes who’ve suffered losses from dealing with broker-advisors who’ve swindled them. Sometimes having fame, extreme riches, and athletic prowess is inadequate protection against getting swindled by a broker. Although professional athletes can certainly afford to hire the best financial advisors, all too often they get thrown in the dirt by dishonest professionals.

Aroldis Chapman is a flame-throwing relief pitcher for the New York Yankees, possessing one of the highest-velocity fastballs in the game. He also briefly helped the Chicago Cubs win a World Series in 2016. But his throwing skill didn’t benefit him when a financial advisor allegedly embezzled millions from him to fund a lavish lifestyle.

In October (2020), Chapman filed a lawsuit against Pro Management Resources in Coral Springs, Florida, for reportedly embezzling $3 million from his account. The company is a commission-based financial advisory firm. Chapman has accused PMR advisor Benito Zavala of “misappropriating Chapman’s funds toward extravagant purchases, including an $836,000 home in Valrico, Fla., first-class plane tickets, clothes, cars and jewelry.” The firm declined to comment on the suit.

2020 has been a difficult year for all. With the approval of the Pfizer and Moderna COVID-19 vaccinations, there is a mix of hope and fear across the country. Four out of ten people have stated that they will not get the vaccine, based on concerns over the safety of the COVID-19 vaccines. Most of the concerns stem from the fact that these mRNA vaccines were created and approved in less than one year, when it typically takes years to develop the vaccine, and test its safety, as reactions may occur months or years down the road. In fact, prior to the 2019 Novel Coronavirus (“COVID-19” or “2019-nCoV”) vaccine, the quickest turnaround for a vaccine was four-years for the mumps vaccine. With such a quick turnaround, (only eight months) there are concerns about adverse reactions, allergic reactions, and the long-term effects of the vaccines. Moreover, with mRNA vaccines being a new “vaccinology”, little is known about the long-term impact of these vaccines on our health.

As the Supreme Court of the United States recognized, vaccines are “unavoidably unsafe”, so many are curious to know, if you are injured, is there any recourse? The short answer is yes, but not against the vaccine manufacturers, administrators, or the FDA directly.

Vaccine manufacturers have been protected from liability for decades, dating back to 1986. Another layer of protection was added in 2005, when the Bush Administration signed into law the Public Readiness and Emergency Preparedness Act, which authorizes the Secretary of the Department of Health and Human Services (“HHS”) to declare that a vaccine manufacturer, along with others involved with the creation and distribution of the vaccine, are immune from liability for claims of loss or injury caused by the administration of the vaccine. This immunity is active for four years, but can be extended. The only exception to this immunity is if there is “willful misconduct” by the company. HHS Secretary Alex Azar invoked the PREP Act in February 2020 to protect COVID-19 manufacturers, distributors, developers, and administrators.

Stoltmann Law Offices previously posted about Scott Wayne Reed, former broker at Wells Fargo Advisors, selling away to his customers, including customers of Wells Fargo. On December 15, 2020, the Arizona Corporation Commission filed a “Notice of Opportunity for Hearing Regarding Proposed Order to Cease and Desist, Order for Restitution, Order for Administrative Penalties, Order for Revocation and Order for Other Affirmative Action” against Reed, his wife, Sarah Reed, Pebblekick, Inc. and Don K. Shiroishi, the Chief Executive Officer and President of Pebblekick.

According to the ACC’s notice, Mr. Reed sold at least $3.5 million of investments in short-term, high-interest notes issued by Pebblekick. Mr. Reed sold these notes as offering an annualized rate of return of sixty-percent (60%). In turn, Pebblekick paid at least $191,340 to Reed. He sold these notes to clients as “100% safe” investments and represented that he also invested in Pebblekick. He went as far as personally guaranteeing $100,000 of the $200,000 investment made by one investor.Reed also sold other outside investment to customers, which he alleged were connected to Pebblekick, including but not limited to Precision Surgical, Mako Studio, and Ascensive Creator.

Reed was a registered representative of Wells Fargo Advisors at the time that he sold this investment, but did not disclose that he was selling notes in Pebblekick or that he received nearly $200,000 in commissions and fees for selling Pebblekick. According to the ACC, “when Reed’s firm reported him for potentially selling away and the Securities Division requested Reed to provide information and documents concerning the allegation, Reed impeded the Division’s investigation by providing responses that were false, incomplete, and misleading.”

Chicago-Based Stoltmann Law Offices, P.C. is currently investigating reports that Michael Edward Magill raised $700,000 in purported private notes that turned out to be part of a criminal scheme. If you were sold investments by Mr. Magill and lost money as a result, you may have a claim to pursue to recover your investment losses through FINRA Arbitration.

According to a FINRA Acceptance, Waiver, and Consent (AWC) signed by Mr. Magill on December 7, 2020, Mr. Magill was hied by a private company to raise money for it. the FINRA allegations state that Mr. Magill solicited at least three investors to invest a total of $700,000 in this company, representing the investments as short term secured notes.  He urged investors to invest quickly because time was of the essence.  Mr. Magill was paid a salary by this company for his services and also received a commission for the investments he sold.  He also distributed marketing materials for the investments.  The investments were not registered with any regulatory agency and were sold in violation of applicable state and federal securities laws.  The principals of the company for whom Magill raised these funds pled guilty to conspiracy to commit wire fraud.

At all times relevant, Mr. Magill was a dually registered and licensed financial advisor with Foreside Fund Services and as a Registered Investment Adviser with WBI Investments, Inc. out of Boca Raton, Florida.  By virtue of FINRA Rules and the fiduciary duty owed by WBI Investments, both Foreside and WBI could be liable to investors who were caught-up in this scheme.  Stoltmann Law Offices has for many years pursued brokerage firms and investment advisers for these claims and has successfully recover money on victims’ behalf.  These companies have legal obligations to supervise the conduct of their registered representatives. Typically referred to in the securities industry as “selling away”, Magill allegedly did not advise the companies he was registered with of his illicit activities.  Nevertheless, there likely existed a stack of red flags that would have put Foreside Funds and WBI Investments on notice that Magill was participating in what was in reality a fraudulent scheme.

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