Articles Tagged with Securities Fraud

The securities fraud attorneys at Stoltmann Law Offices, P.C. continue to investigate investor claims against brokerage firms that sold their clients investments in various GPB Capital Holdings offerings.  On March 22, 2019, attorney Joe Wojciechowski announced the filing of a Statement of Claim with FINRA Dispute Resolution for an investor who was sold units in GPB Automotive Fund, L.P. The claim was filed against NewBridge Securities and also includes allegations in connection with various non-traded REITs issued by American Realty Capital (ARC). The claim is for a retail investor whose financial advisor recommended she invest nearly 100% of her accounts in alternative investments offered by GPB Capital and ARC.  The claim alleges misrepresentations and omissions of material facts in violation of the Securities Act of Washington, consumer fraud in violation of the Washington Consumer Protection Act, negligence for violating numerous regulatory rules including FINRA Rules 2111 (suitability) and 3110  (supervision), and breach of fiduciary duty. Our client seeks rescission of her GPB Automotive Fund investment and compensatory damages for her realized losses in the ARC REITs, plus attorneys fees, costs, interest, and punitive damages.

Investors who were solicited by financial advisors and brokers to invest in GPB Capital funds should consider their legal options to seek rescission of those investments.  Under the state securities laws (frequently referred to as the Blue Sky Laws), the primary remedy for investors is called rescission, which means the investor sues to force the brokerage firm to buy the investment back.  The rescission remedy seeks to put the investor back in the same place she was prior to purchasing the investment. This is important for investors who own alternative investments like GPB Capital Funds.  These are not liquid or tradable investments, meaning an investor cannot call their advisor and sell it and realize a gain or a loss. Essentially, the investor is stuck. Given the troubling news about GPB Capital over the last several months, something Stoltmann Law Offices has written about extensively, investors are correct to be wary and should consider an exit strategy. Unfortunately, because there is no way out of the GPB Funds, the only option for investors may be to pursue arbitration claims against the brokerage firm responsible for soliciting the investments in the first place.

In the last several years, as interest rates remained very low, it has been difficult for investors to find fixed income investments, like corporate and municipal bonds, that offered higher yields without exposing them to speculative risk. Likewise, due to the long term low interest rate environment, the principal value of the bonds begin to drop as interests rates have risen. The solution to these problems for brokerage firms has been to sell “alternative investments” that offer relatively high yields, but because they are non-traded and do not report any real market value, they have the appearance of a stable value for investors. The bonus for brokerage firms is that these alternative investments offer the advisors commissions they could never achieve by selling standard fixed income securities like corporate bonds or municipal bonds. Advisors sell the sizzle of a high yield and fixed prices and either gloss over or completely misrepresent the speculative risk being taken by investors who entrust their money to private entities like GPB Capital.

 

According to records kept by the Financial Industry Regulatory Authority (FINRA), former Capitol Securities Management employee Teryl Trenchard is under investigation for fraud. Capitol Securities terminated Trenchard in March 2017, on the same day FINRA began its investigation. In July 2017, a customer filed a complaint alleging breach of fiduciary duty, conversion and unsuitable investments causing $700,000 in damages. The claim is currently pending. He was also accused of engaging in misappropriation, forgery, fraud, and unauthorized trading in unsuitable transactions. The customer lost $1,800,000 in damages. That claim is currently pending. Brokerage firms such as Capitol Securities are required to reasonably supervise their brokers so as to make sure that they do not violate securities laws. If they do not, they can be held liable for securities losses on a contingency fee basis in the FINRA arbitration forum.

According to his online, public BrokerCheck record with FINRA, Mr. Trenchard was previously registered with J.C. Bradford & Co. in New York, New York from June 1997 until February 2000, Prudential Securities Inc. in New York from November 1999 until December 2000, Voss & Co. in Springfield, Virginia from January 2001 until February 2003, Aegis Capital in Springfield from January 2003 until June 2009 and Capitol Securities Management in Reston, Virginia from May 2009 until March 2017. He has four customer disputes against him, two of which are currently pending. He is not currently registered as a broker.

AdobeStock_99700100-2-300x200The U.S. Securities and Exchange Commission (SEC) fined Barclays Plc $97 million for allegations that the bank falsely charged clients for services that were not being performed. Customers were overcharged nearly $50 million because of violations like imposing fees for due diligence that was never performed and collecting excess mutual fund fees by steering clients into more expensive share classes. The bank will pay a $30 million penalty and more than $60 million in disgorgement and prejudgment interest. If you were a client of Barclays, please call our securities law firm today at 312-332-4200 to find out how to reclaim your losses on a contingency fee basis. The call is free with no obligation.

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.

Did you invest money with Richard L. Brown? If so, you may be able to recover your losses by suing his former firm, Brookstone Securities, in the Financial Industry Regulatory Authority (FINRA) arbitration forum on a contingency fee basis. The call to us is free and there is no obligation. We have represented thousands of investors in this process. Richard L. Brown has one pending and one final criminal charge, according to his FINRA online, public BrokerCheck page. He has one pending civil event and one pending customer dispute. He has been accused of Conspiracy to Commit Securities Fraud, Securities Fraud, Money Laundering Conspiracy and Conspiracy to commit wire fraud. A customer of Brown’s is alleging damages of $72,133 for churning and suitability, stemming from when Brown was registered at Brookstone Securities. Four prior complaints alleged damages of $120,000 for excessive trading and unsuitable recommendations.

Richard L. Brown was registered with H.D. Vest Investment Securities in Irving, Texas from July 1990 until April 1993, Walnut Street Securities in El Segundo, California from April 1993 until October 2005 and Mutual Service Corp in Richardson, Texas from September 2005 until September 2009. He is currently registered with LPL Financial in Richardson and has been since September 2009.

The Financial Industry Regulatory Authority (FINRA) on Monday fined Morgan Stanley Smith Barney $650,000 and Scottrade $300,000 for not implementing reasonable supervisory systems to monitor the transmittal of customer funds to third-party accounts. This comes after both firms were cited for having inadequate supervisory systems in 2011. Executive Vice President and Chief of Enforcement, Brad Bennett, was quoted as saying: “firms must have robust supervisory systems to monitor and protect the movement of customer funds. Morgan Stanley and Scottrade had been alerted to significant gaps in their systems by FINRA staff, yet years went by before either firm implemented sufficient corrective measures.”

Morgan Stanley registered representatives allegedly converted a total of $494,400 from 13 customers by creating fraudulent wire transfer orders and branch checks from the customers’ accounts to third-party accounts. Some of these transfers and checks were moved to the representative’s personal bank accounts.

Scottrade also failed to establish supervisory systems to monitor for wires to third-party accounts from October 2011 until October 2013. The firm did not obtain confirmations for wire transfers of less than $200,000, as well as transfers between $200,000 and $500,000. In total, during this time period, Scottrade processed 17,000 third party wire transfers for a total of $880 million.

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