Articles Tagged with 2012

The Financial Industry Regulatory Authority (FINRA) recently charged two Boca Raton, Florida firms, Newbridge Securities and Shearson Financial Services, for securities violations that resulted in customers losing money. Newbridge Securities Corp allegedly failed to apply discounts to certain purchases. These discounts were supposed to be applied to sales charges, and as a result, clients paid more than $172,000 in excess charges. This misconduct occurred with unit investment trust (UIT) purchases from May 2009 until April 2014. Newbridge was fined $115,000 and agreed to pay clients back more than $188,000.

Shearson Financial was fined $100,000 by FINRA for allegedly inaccurately marking orders as unsolicited, even when they were solicited. The firm was warned in 2012, that 47 order tickets had been inaccurately marked. FINRA also stated that Shearson maintained inaccurate books and records of 1,873 transactions from June 2013 until October 2015. Please call us today for a free consultation with an attorney if you invested money with Newbridge Securities or Shearson Financial. We may be able to help you bring a claim against the firm for investment losses. We take cases on a contingency fee basis only.

According to a recent New York Times article entitled “Morgan Stanley Neglected Warnings on Broker,” Steve Wyatt, a Morgan Stanley broker in Ridgeland, Mississippi, was accused of trading account erratically. He was also accused of improperly managing tens of millions of dollars in client money. Mr. Wyatt was with the company for five years, finally being terminated in 2012, after two years of investigation against him. Former clients claim they lost about half their money with him, or around $50 million. This past week, the Mississippi secretary of state said in a settlement with Morgan Stanley that it had “failed to reasonably supervise” Mr. Wyatt. The settlement subsequently barred Mr. Wyatt and his immediate supervisor from the securities industry for life and Morgan Stanley was forced to create a $4.2 million fund to reimburse clients for their losses. So far, in its cases, Morgan Stanley has had to pay about $3 million. Allegedly, Mr. Wyatt raised so much concern that Morgan Stanley supervisors stopped him from trading in his personal accounts, yet, the firm allowed him to continue to trade money he managed for clients.

In his first year at Morgan Stanley, Wyatt put his client’s money into only two stocks, BlackBerry and Valence, a batter maker that later went bankrupt. Four clients saw their stocks fall more than 60 percent. He also allegedly bought 60 percent of the outstanding shares in a small Israeli computer cable company, RiT, for his clients. The heavy concentration in a single stock was problematic. He was terminated by he firm when evidence showed he had been using a personal email address to push clients to buy investments that he held in his own private accounts. Morgan Stanley can be liable for investment losses because of Mr. Wyatt, or another broker’s failure to take into account client’s best interests. We sue firms such as Morgan Stanley in the arbitration process for clients who have lost money, and we do so on a contingency fee basis only, so we only make money if you recover yours. Please call us today to discuss your options. The call is free.

According to a New York Times article this week entitled “To Crack Down on Securities Fraud, States Reward Whistle-Blowers,” securities regulators in Indiana and Utah are using informants, also known as “whistle-blowers,” to protect their residents from financial harm. Whistle-blowers have been helping regulators at the federal level for quite some time now, and now the states themselves are getting involved.

An Indiana whistle-blower was awarded $95,000 for helping state regulators bring an enforcement action against JP Morgan Chase for failing to disclose conflicts of interest to clients about the way the bank invested their money. That was the first award given under Indiana’s whistle-blower program aimed at securities law violators. In this particular case, the informant told regulators about JP Morgan’s practice of steering clients into in-house funds that generated more costs to the clients, and, at the same time, more fees to the bank itself. The award stated JP Morgan’s practices as “outside the standards of honesty and ethics generally accepted in the securities trade and industry.” Indiana’s program was adopted in 2012 by its state legislature and officials can award up to 10% of monetary sanctions received in an enforcement statement to the whistle-blower.

Utah’s program, adopted in May 2011, allows a whistle-blower to receive up to 30% of the proceeds as an award. The first award Utah awarded was in 2014 to an investment adviser who told officials about $150,000 in questionable transactions he had witnessed while analyzing an elderly client’s holdings. He received $20,000 of the money.

According to a recent Letter of Acceptance, Waiver and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA), Robert Heath, a former AXA Advisors broker was accused of borrowing money from a customer in violation of FINRA rules. He was suspended from the industry for three months and fined $5,000. He was also ordered to pay the customer $7,500 in interest. Allegedly, on July 20, 2012, Heath borrowed $7,500 from his customer. The loan was undocumented and Heath was to make monthly payments to the customer equaling six percent simple interest until the loan was repaid. There was no fixed maturity date for the loan. Heath has not repaid any principal to the customer since taking the loan.

According to his online public FINRA BrokerCheck page, Heath was registered with The Variable Annuity Marketing Company in Houston, Texas from September 1990 until December 2001, AIG Retirement Advisors in Lakewood, Colorado from March 1998 until December 2008, AXA Advisors in Highlands Ranch, Colorado from December 2008 until December 2012 and Presidential Brokerage in Colorado Springs, Colorado from December 2012 until September 2015. He has two criminal dispositions against him and one customer dispute. He is not currently licensed within the industry.

The Financial Industry Regulatory Authority (FINRA) fined Morgan Stanley $2.4 million this week for defaming a former broker. Dale L. Cebert was a former Morgan Stanley registered representative who was terminated in 2014. According to the three-person arbitration panel, Morgan Stanley managers conducted a “flawed internal investigation that was conducted, acted upon, and reported with reckless disregard for its accuracy and completeness, and made defamatory statements to Cebert’s customers in at least a grossly negligent manner (if not with a self-serving malicious motive.)” Cebert was ordered to pay back $1.26 million on two promissory notes, while Morgan Stanley had to pay $2.38 million in damages and another $500,000 in punitive damages. Morgan Stanley allegedly hired Cebert in 2012 with the intention of firing him and keeping his clients. The firm terminated Cebert, citing that he made payments through an outside business.

Mark McLaughlin, a Westover, Alabama mayor was recently and permanently barred from selling securities by the Financial Industry Regulatory Authority (FINRA) and the Alabama Securities Commission. Both entities alleged that McLaughlin engaged in unethical trading practices between 2010 and 2012. Between September 1989 through October 2012, he had served as a registered securities broker with multiple firms, including with Securities America Inc. He has been the mayor of Westover since 2004.

On November 8, 2013, the Alabama Securities Commission ordered McLaughlin to be “barred from further offers or sales of any security into, within or from the state of Alabama.” The commission is a state governmental agency regulating the securities industry in Alabama. This came after the investigation into whether McLaughlin may have committed several violations of the Alabama Securities Act. The ASC alleged that McLaughlin executed a total of 1,009 trades in his 10 most active accounts during the time period between August 1, 2011 until August 31, 2012. One of his clients paid $1,980.63 in commissions in February 2012 alone and had a turnover measure of 831 for a one-year period, which is high.

In November 2014, FINRA enacted a permanent bar on McLaughlin, who previously entered into a Letter of Acceptance, Waiver and Consent (AWC) with FINRA, which claimed that he had engaged in excessive trading and had recommended unsuitable short-term trading of A-share mutual funds. A client alleged that losses in his account were caused by excessive trading. This is also against securities rules and regulations.

Stoltmann Law Offices is investigating Dennis Hayes, a broker with Newbridge Securities Corporation. Hayes allegedly recommended unsuitable transactions. The claimant alleged approximately $750,000 in damages. According to her statement of claim, the client divorced her husband in 2012, after which she had $1,500,000 in assets of which $500,000 was non-qualified money and about $1 million was qualified IRA funds. The client explained to Hayes that she wanted to protect her assets while having returns to meet her immediate income needs. After transferring her funds, Hayes solicited her to invest in a gold fund called USA Gold. Hayes recommended $300,000 in USA Gold through a self-directed IRA account. USA Gold appears to be an unregistered securities offering and most likely an investment scam. Newbridge Securities failed to properly investigate Hayes for his involvement in the unregistered offering. Hayes continues to work at Newbridge, therefore, putting other clients at risk. The claimant also allegedly complained to Gene Robert Abrams, Newbridge’s General Counsel and Co-Chief Compliance Officer, that Hayes was involved in private securities transactions. This is despite multiple sources claiming and proving that Hayes was, and most likely continues to be, involved in fraudulent private securities transactions.

Other risky assets the claimant was invested in included, non-traded real estate investment trusts (REITs) such as American Realty Capital Hospitality REIT, Carter Validus Mission Critical REIT, Griffen Capital Essential Asset REIT, and Business Development Corporation of America, as well as Shopoff Land Fund IV and RCS Capital Corporation (RCAP). All of these securities and REITs are risky, unsuitable investments, that were not along the lines of the claimant’s wishes and investment objectives. A broker must take into account his client’s age, net worth, risk objectives, investment savvy and portfolio before recommending an investment, and, if he does not, his firm can be liable for investment losses by being sued in the FINRA arbitration forum on a contingency fee basis.

According to his BrokerCheck report, Hayes was registered with AAL Capital Management Corp, Veravest Investments, Equity Services, MML Investors Services, Capital Investment Group, NFP Securities and is still registered with Newbridge in Boca Raton, Florida and has been since February 2010. He has two customer disputes against him, one of which is currently pending. Please call us today if you have investments with Dennis Hayes. We may be able to help you recover your investment losses. The call is free with no obligation.

Last week, Paul Burks was found guilty of masterminding one of the largest ponzi schemes in US history. Burks allegedly bilked more than one million investors worldwide out of $800 million. He was convicted on four counts of fraud and conspiracy. He faces up to 65 years in prison and $1 million in fines. His ponzi scheme was one of the largest ever prosecuted by the US Attorney’s office. Attorneys are still trying to recover an additional $225 million from Burks and ZeekRewards. ZeekRewards was an online marketing scheme that generated hundreds of millions of dollars in 2011-2012. Almost nine out of 10 investors in Burks’ scheme lost money. He and his team promised returns of up to 125 percent, manipulated records and exaggerated ZeekRewards’ cash flow to lure a “staggering” amount of investment.

ZeekRewards was started in 2011 to market an online auction site. It offered a share of profits to investors who promoted Burks’ auctions to other online sites or recruited others to take part. Investments were capped at $10,000 but participants could make payments for spouses, children and other relatives. During the first half of 2012, online users of ZeekRewards grew by more than twentyfold. In the end, ZeekRewards paid out more than half the $939 million it generated. Its actual obligations were more than $3.3 billion.

The Securities and Exchange Commission (SEC) announced that it has barred Jeffrey E. Gallagher from the securities industry. Gallagher pleaded guilty to one count of wire fraud, three counts of engaging in monetary transactions in property derived from specified unlawful activity and two counts of tax evasion. Gallagher was sentenced to three years in prison, followed by three years of supervised release. He was ordered to pay $616,535 in restitution to his victims and $69,377 in restitution to the IRS. Gallagher had acted as an unregistered broker-dealer from 2008 until 2012 and was accused of running an investment scam during that time. A total of $617,475 of investor money was lost and he also used $249,703 of the 23 victim’s money for his own personal benefit. He did not report the money to the IRS. Gallagher pled guilty to one count of mail fraud and three counts of interstate transportation of stolen property based on his illegal and unauthorized options trading while employed as a stockbroker at PaineWebber Inc. He was sentenced to 15 months in prison. The SEC barred Gallagher from association with any broker, dealer, investment adviser, municipal securities dealer, municipal advisor, transfer agent or nationally recognized statistical rating organization, and from participating in the offer or trading of any penny stocks.

Former Royal Alliance Associates broker Darrin Farrow was suspended from the industry for one year and fined $25,000 by the Financial Industry Regulatory Authority (FINRA) for setting up a marijuana-growing business and asking his customers to invest in it without his firm’s approval. Farrow opened a pot business called MAD Farmaceuticals in Rocky River, Ohio in 2012 and in early 2015, raised around $1 million from six clients who bought membership interests in an affiliate called MAD Oregon. He was suspended by FINRA because he did not disclose his outside business activity, which is against securities rules and regulations. Farrow was permitted to resign from Royal Alliance in May 2015. Ohio’s state securities division then suspended him in July 2015 for 45 days. At that time, he was working with Triad Advisors, but left the firm last month.

Farrow was registered with The Equitable Life Assurance Society, Equico Securities, Vestax Securities, Linso/Private Ledger, Waterstone Financial Group, Triad Advisors in Westlake, Ohio from August 2009 until February 2010, Royal Alliance Associates in Rocky River, Ohio from February 2010 until June 2015 and Triad in Rocky River from June 2015 until May 2016. He has one customer dispute against him. He is not licensed within the industry.


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