Articles Tagged with FINRA Arbitration

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with broker-advisors who’ve sold their clients variable annuities. One thing we see constantly in our practice is older investors who’ve been sold variable annuities that are onerously expensive and nearly always fail to live up to expectations. Variable annuities are investment products that offer restrictive access to mutual funds with an insurance wrapper. They are expensive to buy and carry ongoing fees and expenses that eat away at investor return. They also offer a tax incentive that brokers love to use as a sales point that in reality provides no benefit to most investors.

The main reason why variable annuities are usually poor investments is that they charge several layers of fees to investors. Everyone gets a cut from the insurance company to mutual fund managers. It’s very difficult for anyone outside of the middlemen to make money. Brokers and their advisory firms, however, sell them aggressively because the insurance companies that pilfer annuities pay out huge commissions to the salesmen who sell them.

Broker-advisors are perennially being cited for variable annuity marketing abuses. Transamerica Financial Advisors was recently fined $8.8 million by FINRA for “failing to supervise its registered representatives’ (brokers) recommendations for three different products,” which included annuities. The firm was ordered to pay more than $4 million in restitution.  The FINRA settlement cited Transamerica’s failure to monitor transactions that involved clients switching from other investments to annuities, which generated millions in commissions and fees for the firms. This is an egregious practice in the brokerage industry that mostly focuses on older and retired investors.

Chicago-based Stoltmann Law Offices has represented investors who’ve suffered losses from dealing with broker-advisors who’ve obtained loans from their clients. When a broker asks a client for a loan, it almost always leads to trouble for the customer. Under securities laws, they are not permitted to do this, except under special conditions. The reasons are quite clear: They are supposed to propose suitable investments and prudently manage their money. Obtaining a direct loan is a conflict of interest that usually leads to chicanery.

Philip Anthony Simone, a former broker with AXA Advisors who worked with the firm from 2017-2019, borrowed a total of $133,000 from two clients. That violated three rules of FINRA, the main U.S. securities regulator, that prohibits brokers from obtaining loans from customers, who were elderly.

The AXA broker then “created and submitted falsified firm account statements and supporting documents to a third-party bank in support of a mortgage application,” FINRA stated. Simone was fined $12,500 and suspended from the securities industry for 11 months, beginning in November, 2020.

Chicago-based Stoltmann Law Offices, P.C. represents GPB investors in claims against brokerage firms and financial advisors who solicited investments in the GPB Capital Funds.  GPB was named in a criminal indictment by the U.S. Department of Justice on February 4. GPB’s top executives were charged with fraud and running a Ponzi scheme. The government charged three GPB executives — David Gentile, Jeffrey Schneider and Jeffrey Lash — with securities fraud, wire fraud and conspiracy.

According to Investment News, “GPB raised $1.8 billion from investors starting in 2013 through sales of private partnerships, but it has not paid investors steady returns, called distributions, since 2018. More than 60 broker-dealers partnered with GPB to sell the private placements and charged customers charged clients commissions of up to 8%.” Stoltmann Law Offices pursues those brokerage firms for their investor-clients to recover GPB losses.

Gentile, the owner and CEO of GPB Capital, and Schneider, owner of GPB Capital’s agent Ascendant Capital, are charged with lying to investors about the source of money used to make 8% annualized investor payments, according to the SEC’s complaint. Using the marketing broker-dealer Ascendant Alternative Strategies, GPB told investors that the unusually high payments were paid exclusively with monies generated by GPB Capital’s portfolio companies, the SEC alleged. At first glance, the distributions were highly appealing to investors, since ultra-safe U.S. Treasury Notes are yielding around 1%.

Stoltmann Law Offices, a Chicago-based investor rights and securities law firm, has been representing investors in cases against brokerage firms that sold the private placement limited partnership offerings in several GPB Funds, including:

  • GPB Automotive Fund
  • GPB Holdings Fund II

Chicago based Stoltmann Law Offices, P.C. has been representing GPB investors in FINRA Arbitration cases since January 2019.  Our securities lawyers continue to file claims against brokerage firms involving solicitations to invest in GPB Automotive Fund, GPB Holdings Fund II, GPB Waste Management, and GPB Cold Storage.  These claims are for violating FINRA rules and regulations in connection with offering speculative private placements to clients, fraud, and violations of state securities regulations.

On February 4, 2020, the Securities and Exchange Commission dropped the hammer on GPB, its funds, its owners. The complaint filed by the SEC alleges that GPB ran a massive securities fraud scheme for at least four years, defrauding investors of upwards of $1.7 billion.  Over the last few years, Stoltmann Law Offices has spoken to hundreds of GPB investors and many of them were not ready to move forward with claims against the brokerage firms responsible for selling them GPB based mostly on the ongoing representation of both GPB and their financial advisors that “everything will be fine” and “GPB just needs to get the audits done and you’re investment will come back.”  These dilatory and lulling tactics started with GPB and filtered through to financial advisors who were more concerned for their own best interests as opposed to what was in the best interest of investors.

INVESTORS NEED TO ACT NOW TO PRESERVE THEIR CLAIMS. Contact Stoltmann Law Offices at 312-332-4200 for a free, no obligation consultation with a securities attorney to determine whether you have a viable case against the brokerage firm that sold you GPB.  

Chicago-based Stoltmann Law Offices has represented investors in cases against securities brokers and has been investigating claims against LPL and filing arbitration complaints for investors. Can securities brokers who’ve been fleecing investors somehow keep working in the industry? If a firm’s records systems are poorly managed, sadly, the answer is yes. Sometimes they slip through the cracks and continue to steal customers’ funds and place them in bad or fraudulent investments that turn out to be Ponzi schemes.

That was the case with former LPL broker James T. Booth, who worked for the firm from 2018 through 2019. Booth pled guilty to one count of securities fraud in October, 2019, and was barred from the industry by the U.S. Securities and Exchange Commission (SEC). LPL was also cited for “supervisory deficiencies” by FINRA, the industry regulator, in connection with Booth stealing “at least $1 million of LPL customers’ money as part of a multi-year Ponzi scheme,” according to thediwire.com. The regulator fined LPL $6.5 million.

There was a bigger problem at LPL, though: FINRA claims that LPL’s recordkeeping system failed to report millions of customer communications. The firm’s failure “affected at least 87 million records and led to the permanent deletion of more than 1.5 million customer communications maintained by a third-party data vendor. These included mutual fund switch letters, 36-month letters, and wire transfer confirmations that were required to be preserved for at least three years.”

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.

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