David Lerner Associates REIT Fine

David Lerner Associates agreed to pay a $650,000 fine for the sale of unsuitable REITs to its investors and other violations.  Very little of the fine will compensate investors for their losses.  Instead, investors suffering losses contact a private attorney.  For a free, confidential consultation, investors can call Jeffrey Pederson at 1-866-817-0201.

LandmarkThe non-traded REITs at issue in the regulatory action were REITs now known as Apple Hospitality REIT investments.  The offerings included are Apple 7, Apple 8 and Apple 9.

Suitability violations are for the recommending of investments that are too risky, complicated or volatile for an investor considering the investors objectives, risk tolerance and investment sophistication.  Non-traded REITs such as Apple are generally only suitable for only a limited slice of the investing public.  Investors, including those looking for either stability, income, low risk, preservation of capital or liquidity from this investment, were likely inappropriately sold this investment.

The agreement to settle the charges was in the form of a consent order entered into with New Jersey regulators.  Of the fine, $100,000 went to pay for costs and $50,000 was to pay for investor education programs.

More information on the fine and the regulatory action can be found at the following link.

FINRA Bars K.C. Ward’s Craig David Dima

FINRA barred former K.C. Ward Financial registered representative Craig David Dima
for making unauthorized and unsuitable trades totaling approximately $15 million in a
73-year-old retiree’s account, and for misrepresenting the reasons for the trades to the
customer.  This was announced in FINRA’s May Disciplinary Report.

NYSE pic 1Susan Schroeder, FINRA Acting Head of Enforcement, said, “There is no place in this industry
for brokers who take advantage of elderly customers. Protecting senior investors from
predatory behavior such as unsuitable and unauthorized trading is part of our core mission
and will always be a priority for FINRA.”

FINRA found that on 11 occasions, Dima sold virtually all of the customer’s Colgate-
Palmolive stock, accumulated over 28 years of employment at the company, without the
customer’s permission. In fact, Dima sold the customer’s shares even after the customer
told Dima not to sell the stock, which she considered a valuable long-term investment
and reliable source of dividends.

When confronted by the customer about the sales, Dima misrepresented to her that they were caused by a “computer glitch” or a technical error. In connection with Dima’s unauthorized sales and subsequent repurchases of Colgate stock, Dima charged the customer more than $375,000 in mark-ups, mark-downs and fees and deprived the customer of substantial dividends had she held the Colgate shares as intended.

FINRA also found that Dima’s trading of the customer’s Colgate shares was unsuitable and
violated FINRA rules prohibiting excessive mark-ups and mark-downs.

Investors of Harold Stephen Pomeranz

Invest photo 2Harold Stephen Pomeranz of Stifel Nicolaus of New York entered into a regulatory settlement with FINRA regulators to settle charges against him.  Though Pomeranz neither admitted or denied fault, FINRA asserted the following factual findings and assessed a deferred fine of $5,000 and suspended from association with any FINRA member in any capacity for three months.

Pomeranz consented to the sanctions and to the entry of findings that he
recommended a number of unsuitable short-term unit investment trust (UIT) transactions
in an elderly customer’s account. The findings stated that the UITs Pomeranz recommended
to the customer had maturity dates of 24 months, and carried initial sales charges ranging
from approximately 2.5 percent to 3.95 percent. Yet the average holding period for the UITs Pomeranz recommended was less than 14 months. Moreover, on numerous occasions,
Pomeranz recommended that the customer use the proceeds from the short-term sale
of a UIT to purchase another UIT with similar or even identical investment objectives.
Pomeranz’s recommendations to purchase and sell UITs on a short-term basis caused the
customer to incur unnecessary sales charges and were unsuitable in view of the frequency,
size and cost of the transactions.

Securities brokers are not allowed to charge commissions and costs that are excessive in relation to the average equity in the portfolio.  So when a broker makes trades in products that have costs of 3 to 4% it only takes a few before those trades become excessive and in violation of the duties owed the investor.

Attention Investors of Voigt Cullen Kempson III

Pederson, PC is investigating the actions of V. Cullen Kempson III currently of American Portfolios and previously of Commonwealth Financial Network.   Kempson has previously settled charges of unauthorized trading in the account of a deceased investor and is currently facing felony weapons charges.  To speak to an attorney for a free and confidential consultation please call 1-866-817-0201.  

A recent settlement agreement Kempson enter into with FINRA regulators agrees to the 30-day suspension for making a large number of unauthorized trades in the account of an investor Kempson knew was deceased.  In the agreement, referred to as an AWC, Kempson neither admits nor denies fault.

The alleged facts are that in February 2007, A Kempson investor opened two investment Invest photo 2advisory accounts with Kempson at the Firm. At the time, the investor signed an agreement with the Firm granting Kempson discretionary trading authority, the ability to make securities trades without first contacting the investor.  A broker must contact an investor prior to the making of trades unless the broker has been granted authority by the investor in writing to make trades in an account.

On June 13, 2015, the investor passed away. Although Kempson was aware of the investor’s death since at least June 29,2015, Kempson did not inform his Firm of the investor’s death and continued to effect trades on a discretionary basis in the accounts.

Between June 29,2015 and April 5, 2016, Kempson effected a total of 40 trades in the deceased individual’s accounts.  FINRA Rule 2010 requires members to observe high standards of commercial honor and just and equitable principles of trade. After the investor passed away, Kempson had no written authority to conduct any trades in the investor’s accounts. FINRA charged that, by effecting 40 trades in a deceased customer’s accounts, Kempson violated FINRA Rule 2010.

Additionally, in February 2017, Kempson was charged on felony weapons charges for the unlawful possession of a weapon.  As stated in his CRD, he case is in front of the New Jersey Superior Court in Essex Vincinage.  He has asserted that he is not guilty.

Attention investors of William McWilliams

Jeffrey Pederson PC is investigating and interested in speaking to investors of William H. McWilliams, formerly of Raymond James and currently of Stifel Nicolaus.  This is in wake of a regulatory AWC entered into by William McWilliams with FINRA that alleges unauthorized trading by McWilliams.  FINRA is the regulatory agency that oversees investment brokers.

FINRA alleged that from August 2014 through December 2014, McWilliams exercised discretionary trading authority without obtaining prior written authorization from the customers and the Firm at least 28 times in eight customer accounts. As a result of such conduct, McWilliams violated regulatory rules NASD Rule 2510(b) and FINRA Rule 2010.  These are rules that all securities brokers must follow.

NASD Rule 2510(b) mandates, “No member or registered representative shall exercise any discretionary power in a customer’s account unless such customer has given prior written authorization to a stated individual or individuals and the account has been accepted by the member, as evidenced in writing by the member or the partner, officer or manager, duly designated by the member, in accordance with Rule 3010.”

NASD Rule 2510(d)(I) states, that the written authorization requirement does not apply to “discretion as to the price at which or the time when an order given by a customer for the purchase or sale ofa definite amount ofa specified security shall be executed, except that the authority to exercise time and price discretion will be considered to be in effect only until the end ofthe business day on which the customer granted such discretion, absent a specific, written contrary indication signed and dated by the customer.”

FINRA Rule 2010 requires associated persons to observe high standards of commercial honor andjust and equitab!e principles oftrade.

During the Relevant Period, while employed at Raymond James, McWilliams exercised discretionary trading authority in response to customer liquidation requests at least six times in four Firm customer accounts without obtaining prior written authorization from the customers and without having the accounts accepted as discretionary accounts by Raymond James.

McWilliams also inappropriately exercised discretion at least 22 times in four other customer accounts. ln these instances, McWilliams failed to discuss the subject trades with the customers on the day ofthe transaction and the Firm prohibited the use ofdiscretion in these circumstances. By virtue ofexercising discretion in the accounts of eight customers without written authorization, McWilliams violated NASD Rule 2510(b) and FlNRA Rule 2010.

Robert “Rusty” Tweed

Jeffrey Pederson PC is interested in speaking to investors of Robert “Rusty” Tweed as part of an investigation into the broker.  Tweed was previously with Cabot Lodge, Concorde Investment Services, and MAM Securities.  Please call 1-866-817-0201 for a free and private consultation with an attorney.  Many issues which may entitle investors to recovery against Tweed’s former employers, have been brought to light by a recent FINRA complaint against Rusty Tweed.  However, time is running on the ability to recover.

FINRA alleges in a complaint that between November 2009 and March 2010, Rusty Tweed obtained more than $ 1.6 million from his retail customers through a false and misleading private placement memorandum (“PPM”) he used to offer and sell interests in his Athenian Fund LP, a pooled investment fund that he both created and controlled.

Tweed drafted and circulated the private placement memo (PPM), a document that is supposed to provide investors with significant information to evaluate the investment, that misrepresented and failed to disclose material information to investors, and twenty three customers invested in the Fund without the benefit of complete and accurate information.

The misrepresentations included: (1) the total potential fees and costs associated with the Fund? (2) Tweed himself, and (3) the entities and individual who would ultimately have immediate control over the money that customers invested.

According to the Complaint, Tweed and the PPM misrepresented or failed to disclose to retail customers the following material facts:

a. First. Tweed and the PPM misrepresented the total potential costs of an investment in the Athenian Fund. opting to disclose certain costs and fees while oniitting others that would reduce any return on investment.

b. Second, Tweed and the PPM also failed to disclose that the omitted fees and costs were added only after Tweed discovered that arbitration (complaints) against him would prohibit him from opening a trading account for the Fund directly and require the use of a more expensive master fund structure.

c. Third, Tweed and the PPM failed to disclose that Tweed had replaced the Fund’s identified master fund with another entity controlled by an undisclosed person (ER). who would now have immediate control over the Fund’s assets. Tweed and the PPM likewise provided no information sufficient for investors to evaluate the risk ofentrusting their capital to ER and his company, such as relevant background. other business activities, and qualifications.

d. Fourth, Tweed and the PPM failed to disclose the additional management fees and perforniance allocations that arose when he granted control to ER and his management company, and Tweed’s own interest in those fees, which would further reduce any return on the retail investors’ capital.

As a result of these material misrepresentations and omissions. Athenian Fund investors could not evaluate the true costs and risks associated with the Fund, including those relating to the individual or the entities with immediate control over their capital.

 

Demitrios Hallas investment loss

Hallas, a former stockbroker representative at a number of New York City broker-dealers, including PHX Financial, Santander, and Forefront Capital, is alleged by the SEC to have violated the multiple federal securities laws.  Investors should speak to a private attorney about their rights. We at PedersonLaw are currently investigating this matter.  Please call 1-866-817-0201.

The allegations contained in the SEC complaint are as follows:

First, Hallas is alleged to have purchased and sold daily leveraged Exchange-Traded Funds and Notes (ETFs and ETNs) in his customers’ accounts, knowingly or recklessly disregarding that these products were unsuitable for such customers.  Hallas had no reasonable basis for recommending daily leveraged ETFs and ETNs.  This constitutes a violation of the suitability requirement that a broker must only recommend investments that are suitable in light of an investors risk tolerance, objectives and that are within an investors level of sophistication.

Second, Hallas is alleged to have stolen funds from investors.  Under the guise of soliciting funds from one of his customers for investment purposes, misappropriated a total of $170,750 from that customer.

The products in which Hallas invested his customers’ hard-earned savings were daily leveraged ETFs and ETNs, and are characterized by a significant degree of volatility and risk. As alleged in the SEC complaint, these products were unsuitable, and Hallas had no reasonable basis for these recommendations.

ETFs are investment companies and ETNs are unsecured notes. Daily leveraged ETFs and ETNs seek to deliver a multiple, the inverse, or a multiple of the inverse of the performance of an underlying index or benchmark over the course of a single trading day. To accomplish their investment objectives, daily leveraged ETFs and ETNs pursue a range of investment strategies, though the strategies are mostly speculative, and only appropriate for investors willing to take the highest level of risk.

The strategies include swaps, futures contracts, and other derivative instruments. These products are inherently risky, complex and volatile, and are only appropriate for sophisticated, high-risk investors.

Unfortunately, Hallas’s customers were unsophisticated and not suitable for such investments. The investors had limited or no investing experience and their incomes, net worth levels, and assets were modest. “The risk and volatility in daily leveraged ETFs and ETNs was inconsistent with the investment profiles of Hallas’s customers, yet Hallas purchased and sold a total of 179 daily leveraged ETF and ETN positions in their accounts from September 2014 to October 2015.”

Hallas’s investors paid a total of approximately $128,000 in commissions and fees in connection with the purchase and sale of these 179 positions. The net loss across these 179 positions was approximately $150,000.

Hallas purchased and sold 22 different daily leveraged ETFs and ETNs in his customer accounts. These products sought to double or triple the performance, or the inverse of 2 Case 1:17-cv-02999 Document 1 Filed 04/25/17 Page 3 of 17 the performance, of over a dozen different underlying indices, including the S&P 500 VIX ShortTerm Futures Index, an investment based upon a volatility index, as well as certain gold mining, oil and gas and Russian, Chinese and Brazilian stock indices.

Finally, in a what the SEC has described as a “brazen and fraudulent scheme,” Hallas misappropriated $170,750 from an unsophisticated investor, who the SEC describes as “a truck driver with no trading or finance experience and no retirement resources outside of the funds that he provided to Hallas.”  The investor transferred funds to Hallas with the understanding that Hallas would make investments on his behalf; instead, Hallas spent Customer’s A’s funds on personal expenditures – a fact that he concealed from the investor.

A comprehensive article on the deeds of Mr. Hallas can be found in Investmentnews.com.

To speak to a private attorney about the recovery of losses with Mr. Hallas, call 1-866-817-0201 for a free and confidential initial consultation.

Attention Investors of Jeffrey Dragon

FINRA alleges that over a two-year period, Jeffrey Dragon, a registered representative of Berthel Fisher & Co. Financial Services. Inc., generated more than $421,000 in concessions for himself and his firm. at the expense of his customers, by recommending and effecting a pattern of unsuitable short-term trading of unit investment trusts ( UITs ).

Specifically, between January 1, 2013 and December 31, 2014 (the ‘UIT Period’ ) Dragon recommended to 12 customers – many of whom were seniors, unsophisticated investors, or both – that they liquidate UIT positions that they had held for only a few months, and which they had purchased on Dragon s recommendations, and then use the proceeds to purchase other UITs. Because each UIT purchased carried a new sales load, and because UITs are designed not to be actively traded, Dragon s recommendations were excessive and unsuitable.

Dragon’s recommendations to these customers were further unsuitable. in that he designed his recommendations to prevent his customers’ UIT purchases from qualifying for sales-charge discounts. Despite regularly recommending that customers purchase UITs in amounts that exceeded volume-discount “breakpoints” of $50,000 and $100.000. Dragon routinely structured their investments – by spreading the amounts over smaller purchases and multiple days – in order to avoid reaching those thresholds. By doing so. Dragon sought to increase his concessions at his customers’ expense.

Berthel allowed this activity to occur – and. in fact, profited from it – as a direct result of its inadequate system for supervising UIT trading. Throughout the UlT Period. Berthei’s only regular supervisory review of UIT recommendations and customer activity consisted of manual reviews of daily trade blotters that did not indicate either how long UIT positions had been held before liquidation or the source of funds used to purchase new UITs. Thus, Berthel’s supervisory system was not reasonably designed to prevent short-tenn and potentially excessive UIT trading.

Berthel’s supervisory system was also inadequate because it was not reasonably designed to prevent short-term and potentially excessive trading in mutual funds. As with UlTs. the firm’s supervisory system lacked any methods, reports, or other tools to identify mutual-fund switching or trading patterns indicative of other misconduct between January 1. 2013 and December 31, 2015 (the ‘ Mutual Fund Period’ ).

Likewise, Berthel’s supervisory system was not reasonably designed to censure that the firm’s UIT and mutual-fund customers received all sales-charge discounts to which they were entitled during the UIT Period and Mutual Fund Period, respectively. Instead. Berthel relied 2 on its registered representatives and its clearing firm to determine whether UIT and mutual-fund purchases should receive sales-charge discounts, and conducted no review or supension to determine i f those discounts were applied correctly.

This not only allowed Dragon s breakpoint-manipulation scheme to go unchecked, it also resulted in further injury to Berthel s customers: from 2010 through 2014, Berthel failed to detect that more than 2,700 of its customers’ UIT purchases did not receive applicable sales-charge discounts. As a result, Berthel customers paid excessive sales charges of approximately $667.000, nearly all of which was paid to Berthel and its registered representatives as dealer concessions.

Mark Holt Loss Recovery

Mark Holt is a former stock broker currently serving a prison sentence for stealing the funds of his investors and sending false account documents.  The scheme victimized investors in Minnesota and likely elsewhere.  Due to the incarceration, investors seeking recovery will likely need to pursue Holt’s former employers by means of FINRA arbitration for loss recovery.

From August 2005 to February 2007, Holt was a registered representative of Geneos Wealth Management, Inc., which is both a securities brokerage and investment adviser. From February 2007 to November 2013, Holt was a registered representative of Harbour Investments, Inc., which is also a dually registered entity. Holt, 47 years old, is currently incarcerated at the Federal Correctional Institution in Oxford, Wisconsin.

guy in handcuffsDetails of the SEC action can be found in its release.

On August 14, 2014, Holt was sentenced to a prison term of 120 months followed by three years of supervised release and ordered to make restitution in the amount of $2,940,982.75.  The chances of these payments being made is not great considering Holt could be incarcerated for much of the next ten years.

The allegations are that from about September 2005 through Jan. 12, 2014, Holt “knowingly caused an email communication to be transmitted in interstate commerce via servers in Texas to a client in Minnesota that would give the client access to false account statements.”

The SEC and the criminal documents state that Holt “misappropriated [investor] funds by depositing client checks into a bank account he controlled and using these funds to pay for personal and business expenses. In furtherance of his scheme, Holt lulled his clients into believing that he had purchased various investments for them by sending fraudulent Morningstar client summaries and [...] a web-based portal, that displayed fraudulent account balances.”

“Holt made monthly payments to his clients that were intended to appear as interest or annuity payments,” in a classic Ponzi-type scheme.

Anne Marie Comcowich Loss Recovery

Anne Marie Comcowich, a Scranton, Pennsylvania area securities broker, has agreed to a sanction to resolve a FINRA investigation.  The underlying investigation concerned the unauthorized withdraw of funds, theft, from investor accounts.  Ms. Comcowich was previously with Prudential.

In 2017, while being investigated in connection with unauthorized withdrawals, Comcowich, through her lawyer, informed FINRA staff that she would not produce information and documents requested pursuant to FINRA Rule 8210. Comcowich thereby violated FINRA Rules 8210 and 2010.

By failing to participate in the regulatory action, Comcowhich received a bar from FINRA which Bull pictureprohibits her from working with any other securities brokerage.

Details of the FINRA action can be found in its AWC.  In the AWC, Comcowich neither admits nor denies the allegations.

Comcowich was suspected of processing 13 unauthorized withdrawals from customer accounts. In an email and follow up telephone call with FINRA staff on April 3, 2017, and by this agreement, Comcowich acknowledges that she received FINRA’s requests and will not produce the information and documents requested.  The actions of Comcowich are in violation FINRA Rule 2010 provides that “[a] member in the conduct of its business shall observe high standards of commercial honor and just and equitable principles of trade.” A violation of FINRA Rule 8210 is also a violation of FINRA Rule 2010.

Jeffrey Pederson is an attorney who has represented investors similarly victimized.  A limited number of attorneys have such experience in front of FINRA, where such cases would need to be brought.  Please call for a free and confidential consultation.