Articles Tagged with TD Ameritrade

Stoltmann Law Offices, P.C. is a Chicago-based securities and investment fraud law firm that offers representation to victims on a contingency fee basis, nationwide. We are investigating claims for investor/victims of Ron Harrison’s alleged options trading scheme. On September 30, 2021, the SEC filed a civil complaint against Ron Harrison and his company Global Trading Institute, LLC seeking an injunction and to have a restraining order put in place to freeze his assets.  The SEC complaint alleges that Harrison ran a substantial options trading scheme where he charged clients a percentage of alleged gains in their brokerage accounts on a monthly basis. The problem is, as alleged by the SEC, there were no gains, only losses. According to the complaint, Harrison traded directly through access to his clients’ brokerage accounts.  Twenty-two investor victims suffered losses of over $2 million.  The SEC alleges that Harrison received at least $900,000 in ill-gotten fees from the scheme, a lot of which was transferred to his Russian fitness instructor girlfriend.

Harrison was not licensed to provide investment advice or trade securities with any regulator or state. In fact, he was barred from the securities industry way back in 1992 for misappropriating funds and excessively trading customer accounts. This trading scam dates back to 2016 and continued on well into 2021.  Records reviewed by Stoltmann Law Offices reveals that Harrison’s clients used TD Ameritrade as their broker/dealer. Part of Harrison’s scheme was to have investors provide him with their credentials to log into their brokerage accounts and trade options pursuant to his alleged strategy.  The options trading Harrison engaged in was highly speculative and aggressive, including writing naked put options and using hefty amounts of margin.  Because of the activity Harrison engaged in, and because of the highly regulated market options trading takes place in, TD Ameritrade could be liable to Harrison’s victims for aiding and abetting his scheme.

In order to trade options in any brokerage account, the brokerage firm must perform a high level and detailed know your customer analysis. To qualify for the level of margin Harrison used, referred to as portfolio margin, the account owner in many cases has to take a test to even qualify for that level of margin clearance.  Furthermore, technical metrics and electronic log-ins and tracing would have revealed that Harrison was logging into multiple client accounts from the same device and IP address. Since he was unlicensed, he could not do this and TD Ameritrade’s compliance system should have caught on to what he was doing, but failed to do so.  FINRA Rules, Anti-Money Laundering, and Bank Secrecy Act regulations mandate that TD Ameritrade have adequate compliance systems to detect and deter violations of this sort.

Chicago-based Stoltmann Law Offices, P.C. represents clients nationwide in securities and investment arbitrations and litigation. One area we are very familiar with, is to look for all liable parties when investment advisors commit securities fraud. In many instances, there are multiple potentially liable parties beyond the primary bad actors, including banks that facilitate the illegal movement of funds and brokerage/clearing firms that facilitate illegal trading schemes.  Cherry-picking is one of those trading schemes that brokerage or clearing firms are geared to supervise for and prevent. In the event you are a victim of a cherry-picking scheme orchestrated by your trusted investment advisor, you may have a viable claim against the brokerage firm or custodial firm that executed the trades on behalf of the investment advisor.

According to published reports, Barrington Asset Management and Gregory D. Paris executed an allocation scheme which resulted in profits to the firm and losses to firm advisor clients.  In a civil complaint filed June 28, 2021, the Securities and Exchange Commission alleged that Barrington Asset Management and Gregory D. Paris, who was the firm’s chief compliance officer, executed this “cherry-picking scheme” in violation of several federal securities laws including Sections 17(a)(1), 17(a)(2) and 17(a)(3) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act (“Exchange Act”) and Rules 10b-5(a), 10b-5(b) and 10b-5(c) thereunder; and Sections 206(1) and 206(2) of the Investment Advisers Act (“Advisers Act”). According to the SEC complaint, Barrington Asset Management executed this scheme through a pooled trading fund called the Barrington Opportunity Fund.

As investment advisors, Barrington Asset Management cannot execute securities transactions. They must use a FINRA registered broker/dealer to do so. In this circumstance, this brokerage firm plays the role of “custodial” firm, where the firm physically holds cash on behalf of the RIA’s clients and also executes or brokers securities trades. These are generally back-office functions and these companies, like Schwab, Fidelity, TD Ameritrade, and Interactive Brokers, typically disclaim away any responsibility to supervise for the suitability of the transactions at issue. What they cannot disclaim away, however, are their obligations under the Bank Secrecy Act and Patriot Act to supervise for illegal activities. One of the most common schemes executed by RIAs like Barrington Asset Management is the “cherry-picking” scheme, and these firms typically do have compliance and supervisory systems in place to check for and prevent such illegal activity. When they fail to detect this sort of scam, they could be secondarily liable for aiding and abetting breach of fiduciary duty, or for negligent supervision.  Here, the facts also reflect that Barrington Asset Management trading in leveraged ETFs, which are extremely high risk and volatile investments.  According to the SEC complaint, the manner in which trades were allocated statistically represented a 1 in a billion outcome for the Advisor – Paris. The SEC identifies these firms as “clearing broker A”and “clearing broker B”.

Chicago-based Stoltmann Law Offices is investigating incidences of investors whose brokerage accounts have been hacked. Market regulators are investigating reports that customers of the popular online trading app Robinhood were ripped off. Hackers reportedly obtained account information of Robinhood customers, then transferred funds out of their accounts. The customers have contacted the U.S. Securities and Exchange Commission and FINRA, the securities industry regulator, to probe the thefts.

How safe is your money in an online brokerage account? It should be protected by numerous safeguards, although lately cyberthieves have found a way to steal money directly from investors. During the COVID pandemic, online trading soared, with millions of day traders using their phones and other devices to trade stocks and other securities. But as a recent wave of customer complaints suggest, their accounts have been hacked and money taken from their accounts, according to Bloomberg News.

In a statement to Bloomberg, Robinhood did not take responsibility for the thefts:

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Business diagram shows change of the prices for oil

Were you a client of Creative Planning and TD Ameritrade? Did you have unauthorized trades placed in your account in oil and gas related echange traded notes or funds?  If so the FINRA arbitration claims process can be used to recover those losses.  Please contact our law firm in Chicago for a no cost review by an attorney as to how Creative Planning and TD Ameritrade can be sued in the FIRNA arbitration forum.

AdobeStock_35532974-1-300x200Were you a client of TD Ameritrade, Charles Schwab, ETrade or Fidelity? Were your account positions sold out to satisfy margin calls? If so, under some circumstances, the brokerage firm can be sued to recover the losses associated with the margin blowout activity.

Ordinarily, brokerage firms have the right to liquidate investors out of various positions to satisfy margin calls. We are currently representing clients who were told by the brokerage firm they had a specific period of time to satisfy the margin calls. Unfortunately, the firms then proceeded to sell the clients out of those positions prior to the time given to satisfy the margin calls. The verbal representations made by the firm modified the contract and required the firms to give the investors that period of time to satisfy the calls.

The FINRA arbitration claims process or class-action lawsuits can be used to recover damages associated with the margin blowouts. Please call our law firm in Chicago Illinois for a no-cost review by an attorney.

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