Articles Tagged with LPL Financial

Stoltmann Law Offices, P.C. is a Chicago-based investment fraud and investor rights law firm that offers representation to victims of investment fraud nationwide. We have tried and won many cases against LPL Financial over the years and represented hundreds of investors who were victims of various types of investment fraud as a result of the misconduct of LPL financial advisors.

According to multiple reports, including a complaint filed by the Securities and Exchange Commission, for upwards of ten years, James K. Couture, while a registered representative for LPL Financial based in Boston, Massachusetts, stole upwards of $2.9 million from clients.  Couture pulled this off by convincing his clients to sell legitimate securities in their accounts and transfer the funds to an “investment” in a company owned and controlled by Couture called Legacy Financial.  Once Couture gained control of his clients’ money, he converted it and spent it for his own use. This is a classic scheme in the brokerage and advisory world known as “selling away”.  According to the SEC and the indictment filed by the U.S. Attorney for the District of Massachusetts, Couture kept the scam going by fabricating account statements for his clients that showed money being “reinvested” and also provided account reviews which disguised the fact that he was committed rote fraud.  When clients would request withdrawals, Couture would take money from Client A and pay it to Client B, which is the classic sign of a Ponzi scheme.

According to his FINRA BrokerCheck Report, Couture was registered as a licensed securities broker and advisor through LPL Financial from February 2009 through July 2020 out of offices in Worcester and Springfield, Massachusetts.  At that point, LPL fired him for cause based on the same misconduct that led to his indictment and the SEC complaint. A few months later, in October 2020, Couture accepted a permanent bar from the securities industry from FINRA when he knowingly failed to respond to a request for information from the regulator in connection with an investigation into his misconduct.

Chicago-based Stoltmann Law Offices, P.C., has represented hundreds of investors over the years in both arbitration and litigation against LPL Financial. Many of these claims involved situations where the financial adviser sold the investor an investment that ended up being a Ponzi-like scheme. Rhett Bedwell, it would seem, falls into that category of former LPL brokers who sold clients fraudulent investments.

According to published reports, Rhett Bedwell, of Rogers, Arizona, while a registered broker with LPL Financial allegedly transferred a client’s IRA to an IRA custodian, using forged documents, and invested the client’s IRA in a Ponzi scheme. According to regulatory documents filed by LPL Financial, Bedwell was under an internal investigation at the firm at the time he was “permitted to resign” and was also subject to customer complaints, event though there is only one customer complaint disclosed on his FINRA BrokerCheck Report.   On February 10, 2021, Bedwell signed a FINRA Acceptance, Waiver, and Consent (AWC) which barred him for life from the securities industry. By failing to respond to FINRA’s request for information in connection with a regulatory investigation, Bedwell sealed his professional fate.

In circumstances like this, investors need to realize the brokerage firm with whom the broker was registered, in this instance, LPL Financial, is legally responsible for his misconduct under two independent legal theories. First, as a licensed, registered financial adviser, anything Bedwell did as a financial adviser, is part of the scope and course of his agency with LPL Financial. Investors don’t sue the brokerage firm when brokers cause property damage, for example, because LPL is not responsible for what the firm’s brokers do outside of providing financial and investment advice. But in this circumstance, surely from the investor’s perspective, Bedwell was providing financial and investment advice at all times.  The second road that should be taken is a direct claim against LPL for negligent supervision.  The securities rules are clear and the obligations are rock solid that LPL must maintain adequate supervision and compliance over its brokers in order to prevent and to deter violations of state and federal securities laws. Either way, LPL can be liable for the misconduct of its brokers.

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, P.C. is a securities investor protection law firm offering representation nationwide to investors seeking to recover investment losses.  Our team is monitoring and reviewing information in connection with former LPL  financial advisor Donald Stephen Woods. According to published reports, Mr. Woods, of Louisville, Kentucky and currently registered with Thurston Springer Financial, intentionally manipulated and changed documents at LPL to qualify non-traded REIT sales that would have otherwise not been approved. LPL has certain limitations on how much of an investor’s declared liquid net worth can be concentrated in alternative investments, like non-Traded REITs.  Typically, LPL limits this exposure to 25% of liquid net worth, but can be lower for elderly investors and those with more conservative investment objectives. Brokers like Woods get around this limitation by inflating the client’s net worth numbers adjusting them upwards by a few hundred thousand dollars can be the difference between compliance approving the transaction and the broker getting paid his massive commission, and not approving it, leaving the broker to find something else to sell the client.

Ultimately, the responsibility for this sort of amateur chicanery engaged in by Mr. Woods falls on his firm. Stoltmann Law Offices has represented hundreds of investors in cases just like this. Almost always, there is an obvious disconnect or contradiction between the net worth numbers on the alternative investment forms, and the client’s new account forms. Compliance has a responsibility to ensure that brokers like Mr. Woods are not artificially inflating client net-worth numbers on these forms in order to qualify them for the investment. Most of the time all it would take is a simple phone call from compliance to the client to determine the accuracy of these numbers and reveal that the broker either forged the documents altogether, or advised the client to ignore the net worth numbers included on the form, to trust their adviser, and not worry about it.

Non-Traded REITs have been selling at rates not seen since before the financial crisis in 2008. There is one reason for this – commissions.  Non-Traded REITs like those offered by Northstar, Cottonwood, Highlands REIT, KBS Growth & Income REIT, Resource Innovation Office REIT, and InvenTrust Properties Corp., pay brokers like Mr. Woods and their firms like LPL commission rates that are many times higher than if they just sold clients publicly-traded, liquid REITs.  The SEC, FINRA, and NASAA all warn about issues related to these non-traded REITs.  Scholarly articles decry them as being poor investments long term compared to their publicly-traded cousins. Some of the issues about these non-traded REITs include:

LPL terminated financial advisor Dain F. Stokes on August 28, 2019 for selling unregistered promissory notes to clients that purported to invest in a project in Africa allegedly sponsored by Taylor Swift. According to InvestmentNews, Stokes converted at least $576,000 from two clients, whom he solicited to invest in this phony charity project, which he sold as being created by Swift to help needy people in Africa. Stokes claimed to have a close relationship with Swift, telling clients that she personally hired him to manage the finances of the Africa project and to promote a new song release by her in June 2019. He also told clients that Bill Gates was involved in the project.

The State of New Hampshire Department of State Bureau of Securities Regulation filed a petition and order against Stokes after an investor (“Investor #1”) invested $201,000 in the Africa Project between August 1, 2018 and January 25, 2019. Stokes used promissory notes to facilitate these investments. According to the promissory notes, Investor #1 would receive the return of his entire principal plus 20% interest by making this investment. Payment on the first promissory note was initially due by November 8, 2018, however the due date was continually pushed back by Stokes. At one point, he even told his client that President Donald Trump allegedly froze his assets. Stokes was ordered to pay $201,000 plus interest in restitution to Investor #1 and a $20,000 fine for violating New Hampshire Blue Sky Laws, which prohibit the fraudulent sale of securities (RSA 421-B:5-501) and the sale of unregistered securities (RSA 421-B:3-301(a)). To date, a second investor who invested $375,000 has come forward.  The New Hampshire Department of State Bureau of Securities Regulation has since frozen Stokes’ assets and issued an injunction prohibiting him from speaking with those who invested in this scam.

New Hampshire authorities interviewed Stokes, who refused to provide any details about the African charity, claiming that all information, including the name, was privileged. He also refused to reveal whether the checks, which were made payable to him personally, were invested in his personal accounts.

The State of Indiana recently imposed a $450,000 civil penaltyagainst LPL Financial for failing to supervise the company’s financial advisors on a state-wide basis.  The fine was based on two material deficiencies in LPL’s supervisory system. First, due to an alleged software glitch, LPL supervisors were not monitoring or supervising an undisclosed number of emails. There is an obligation for LPL to supervise all incoming and outgoing correspondence with firm clients. This obligation is rooted in FINRA Rule 3110(b)(4), which provides:

The supervisory procedures required by this paragraph (b) shall include procedures for the review of incoming and outgoing written (including electronic) correspondence and internal communications relating to the member’s investment banking or securities business. The supervisory procedures must be appropriate for the member’s business, size, structure, and customers. The supervisory procedures must require the member’s review of:

(A) incoming and outgoing written (including electronic) correspondence to properly identify and handle in accordance with firm procedures, customer complaints, instructions, funds and securities, and communications that are of a subject matter that require review under FINRA rules and federal securities laws.

According to a Letter of Acceptance, Waiver and Consent (AWC) with the Financial Industry Regulatory Authority (FINRA), Leslie Koonce, a former broker with LPL Financial, violated securities laws. Allegedly, between January 2012 and March 2015, Koonce participated in several private securities transactions without providing prior written notice to his firm, LPL. He also completed firm compliance questionnaires in which he falsely denied participating in private securities transactions, and he later provided false responses to questions asked by FINRA. These are all against securities laws and internal firm rules. For this misconduct, he was permanently barred from the industry.

According to his FINRA BrokerCheck report online, Mr. Koonce was previously registered with Hornor, Townsend & Kent in Horsham, Pennsylvania from May 1984 until September 1998, Main Street Management Company in Boston, Massachusetts from December 1999 until May 2004, Associated Securities Corp in Menlo Park, California from May 2004 until September 2009, LPL in Menlo Park from September 2009 until December 2015, Cetera Advisor Networks in Menlo Park from December 2015 until December 2015 and EK Riley Investments in Menlo Park from December 2015 until November 2017. He is not currently registered as a broker within the industry.

The Financial Industry Regulatory Authority (FINRA) records indicate that Kenneth Savino, a former LPL broker, was suspended from the industry for 15 days and fined $5,000. He allegedly purchased shares of a security for $100,000 without providing prior notice to his member firm and inaccurately indicated on an annual compliance questionnaire that he had not participated in any private securities transactions. He was discharged from LPL in October 2015 for allegedly entering into a loan transaction with another company, receiving shares of the company in return, with no pre-approval by the firm. He also allegedly made private securities transactions that he did not have pre-approved by the firm and introduced a client to a potential outside investment opportunity that was not approved by the firm. These are all against securities laws and internal firm rules. Selling away refers to when a financial advisor solicits investments in promissory notes or companies that are not pre-approved by his member firm. He does this in order to not have to share the commissions he earns from the sale with his member firm. The firm can be held liable for losses in this case.

According to FINRA records, Mr. Savino was previously registered with Manequity Inc. from May 1983 until December 1988, Lincoln Financial Securities Corp in Windsor Locks, Connecticut from December 1988 until July 2010 and LPL Financial in West Hartford, Connecticut from July 2010 until November 2015. He is currently registered with FSC Securities in East Hartford, Connecticut, and has been since December 2015.

Stoltmann Law Offices is investigating Sonya Camarco, a former LPL broker. Recently, the Securities and Exchange Commission (SEC) obtained an emergency court order to freeze her assets in order to prevent her from further dissipating funds she stole from her clients. Allegedly, during a 13-year period, Camarco stole money from her clients’ accounts. She allegedly forged client signatures on checks made out to an entity called “C Investments,” and had the checks sent to a private post office box. She then deposited the checks into a bank account in the name of “Camarco Investments Inc.” an entity of which she was the sole registered agent and which she shares an address with her office. She also allegedly liquidated securities in her clients’ accounts to make unauthorized payments to her own accounts. She then claimed that the C Investments were an outside investment that she made on their behalf and said she had no affiliation with C Investments. This was untrue. The SEC alleges that Camarco used the stolen client funds to pay her personal credit card bills and mortgages.

Camarco was previously registered with Merrill Lynch in New York, New York from December 1993 until July 2000, Morgan Stanley in Purchase, New York from July 2000 until March 2004 and LPL in Colorado Springs, Colorado from February 2004 until August 2017. She is currently not registered within the industry. Please call us today if you suffered losses with Ms. Camarco. We may be able to help you recover those losses on a contingency fee basis.

AdobeStock_78306447-1-300x199On Friday, May 12, LPL Financial’s sustained a system-wide technology outage. A construction crew damaged underground cables that provide critical network connectivity for LPL. The back-up connection experienced an unrelated technical issue and was unable to provide support as planned. As a result, advisors and clients were unable to access LPL’s system. This means clients who wished to buy or sell securities were mostly unable to do so. if this resuled in client losses or missed opportunities for gains, LPL can be sued for this in the FINRA arbitration system. Please call us today for a free consultation at 312-332-4200

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