Redonda Russell

broker in handcuffsWe are investigating the actions of former stockbroker/financial advisor Redonda Russell and potential liability of her former employer, First Command Financial.  For information, call the Law Offices of Jeffrey Pederson toll-free at 1-866-817-0201,

Ms. Redonda Russell, a former Ft. Worth, Texas financial advisor is believed to have stolen $316,000 from her investors.  She misused a medallion notary stamp to perpetuate her fraud so her fraud could be conducted electronically. In her scam, she closed 18 client accounts, eight of which were inactive. That made the fraud harder to detect.   She also took funds from clients which she referred to as “loans.” Russell worked for First Command Financial for more than two decades.  She pled guilty to charges of wire fraud in August 2014.   She was facing up to 20 years in prison and $250,000 fine but it is believed that the plea will mean she will serve only one year in prison.

Brokerage firms have stringent regulatory requirements that they must meet to protect investors from brokers misappropriating funds.  We have represented investors in a substantial number of similar claims concerning broker conversion and theft.

Philip Mark Cain

Stock handcuffsWe are investigating the actions of former stockbroker/financial advisor Philip Mark Cain and potential liability of his former employer, H. Beck.  For information, call the Law Offices of Jeffrey Pederson toll-free at 1-866-817-0201,  In December, 2011, Cain was sentenced to 51 months in prison by a federal judge in Tucson after he pleaded guilty to counts alleging mail fraud. This fraud was in connection to taking money from investors who thought it would be used to purchase structured notes from Deutsche Bank.  The funds were never invested.  Instead, Cain deposited the money in his personal bank account. Cain used some of the money to repair classic autos. The cars were then auctioned for a total of about $978,000.

Brokerage firms have stringent regulatory requirements that they must meet to protect investors from brokers misappropriating funds.  We have represented investors in a substantial number of similar claims concerning broker conversion and theft.

Recovery for UBS Puerto Rico Funds

UBSIf you have suffered losses in Puerto Rico funds invested through UBS please call toll-free 1-866-817-0201.

As reported in Market Watch, the Financial Industry Regulatory Authority (FINRA) announced today that it has censured and fined UBS Financial Services Incorporated of Puerto Rico (UBS PR) $7.5 million for supervisory failures related to the suitability of transactions in Puerto Rican closed-end funds (CEF). In addition, FINRA ordered UBS to pay approximately $11 million in restitution to 165 customers who realized losses on their CEF positions.

FINRA found that for more than four years, UBS failed to monitor the combination of leverage and concentration levels in customer accounts to ensure that the transactions were suitable given the customers’ risk objectives and profiles creating suitability violations. The firm failed to implement a reasonably designed system to identify and prevent unsuitable transactions in light of the unique Puerto Rican economy, in which retail customers typically maintained high levels of concentration in Puerto Rican assets and often used those highly concentrated accounts as collateral for cash loans. Despite UBS PR’s knowledge of these common practices, it failed to adequately monitor concentration and leverage levels to identify whether certain customers’ CEF transactions were suitable in light of the increased risks in their existing portfolio.

Brad Bennett, FINRA Executive Vice President of Enforcement, said, “UBS of Puerto Rico operated in a unique economy and ultimately failed to tailor its supervisory systems to its specific business needs. Despite the fact the firm was very familiar with the unusual characteristics of its retail accounts, it did not supervise these transactions properly to prevent customers’ heightened exposure to risk.”

In this case, UBS solicited certain customers to open lines of credit collateralized by their securities accounts. If the customer’s account value fell below the required collateral level, the customer received a “maintenance call” and was required to deposit additional assets or liquidate securities to meet the call. Where an LOC is collateralized by a diversified account, a customer may have a variety of securities that s/he can liquidate to meet a maintenance call. However, the risk of investor loss is increased when an LOC is collateralized by a highly concentrated account – and due to the unique benefits of Puerto Rican assets for Puerto Rican residents, UBS PR customer accounts were typically highly concentrated in CEF shares. The market events of Aug. 2013 caused the value of many CEF shares to plummet, and customers who received maintenance calls were forced to realize substantial losses in order to meet them.

Equinox Securities Charged with Fraud

Equinox Securities and its brokers Stephen Michael Oliveira and Chris Blaine Palkowitsh were named respondents in a FINRA complaint alleging that the firm and Palkowitsh engaged in a manipulative, deceptive and fraudulent scheme by churning customer accounts. If you were a victim, or are uncertain if you are a victim, of Oliveira, Palkowitsh or Equinox please call 1-866-817-0201 to speak to a private attorney about your rights and ability to recover your losses.  The consultation is free and confidential.

The FINRA complaint alleges that the firm and Palkowitsh acted with intent to defraud and/or reckless disregard of their customers’ interests by seeking to maximize their own commissions. The trading in the customers’ accounts was, as evidenced by the high annualized cost-to-equity ratios and number of transactions, excessive in light of and inconsistent with the customers’ investment objectives and financial situations. None of the customers acquiesced or consented to the heavy level of trading in the accounts.

The effect was particularly pernicious because six of the eight accounts were individual retirement accounts that constituted the bulk of the customers’ retirement savings. After the customers sustained substantial losses, Palkowitsh placed their remaining equity at risk by concentrating each account in a low-priced security. As a result of the excessive trading and churning in the accounts, each of the customers suffered extensive losses and paid exorbitant fees and commissions to the firm and Palkowitsh.

As a result of their conduct, the firm and Palkowitsh willfully violated Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5, NASD Rules 2110 and 2120, and FINRA Rules 2010 and 2020.  Palkowitsh also failed to timely amend his U4 to disclose at least three federal tax liens.  The complaint also alleges that Palkowitsh made unsuitable recommendations to customers, which the firm is liable for, and lacked reasonable grounds for believing that the customers’ understood and were willing and able to assume the risk particular to having their accounts heavily concentrated in a single, low-priced security where a significant loss would effectively wipe out the customer’s entire principal in these accounts, many of which were the customers’ sole retirement accounts.

The complaint further alleges that the firm and Oliveira failed to adequately investigate and act upon the misconduct Palkowitsh committed over a lengthy period of time, and also failed to ensure that Palkowitsh acted in a manner that was compliant with applicable laws, regulations and rules. In addition, the complaint alleges that there were multiple red flags suggesting that Palkowitsh was excessively trading, churning, and generally making quantitatively and qualitatively unsuitable recommendations. These red flags were known to but not addressed by Oliveira, who was the firm’s chief executive officer (CEO), CCO and Palkowitsh’s supervisor, or, through Oliveira, by the firm. The firm and Oliveira failed to establish, maintain,and enforce a supervisory system and WSPs that were reasonably designed to achievecompliance with applicable securities laws and regulations.

Moreover, the complaint alleges that Oliveira was responsible for establishing and maintaining the firm’s supervisory systems and procedures and for establishing an adequate system and procedures to ensure that Form U4s of the firm’s representatives included all required disclosures and were updated in a timely manner. Oliveira failed to discharge those responsibilities adequately because the firm’s supervisory system and procedures were not reasonably designed to achieve compliance with applicable securities laws, regulations and rules. Oliveira failed to conduct any meaningful review and take any meaningful action to detect and prevent unsuitable recommendations. After Palkowitsh’s initial Form U4 was filed, Oliveira never inquired about his bankruptcies, judgments or liens; and, in particular, never inquired about whether his Form U4s was current and accurate.


Smith Barney/Citigroup Falcon, MAT and ASTA Losses

August 24, 2015, Citigroup paid $180 million to the SEC to settle allegations that Smith Barney and Citigroup improperly sold high risk hedge funds known as MAT, ASTA and Falcon.  Investors should contact a private attorney if they have suffered such losses.  For a free consultation please call 1-866-817-0201.

The fraudulent actions alleged, and with Citi ultimately settled for $180 million, concern material misstatements and omissions made by Cit between 2002 and 2007 in the offer and sale of securities in two now-defunct hedge funds—the ASTA and MAT funds (“ASTA/MAT”) and the Falcon Strategies funds (“Falcon”).  The ASTA/MAT and Falcon funds were recommended and sold by two groups of individuals, the “financial advisers” of Smith Barney and the “private bankers” of Citigroup Private Bank (together, the “financial advisers”), to their advisory clients. The financial advisers were associated with respondent CGMI (Citigroup Global Markets). Both funds were managed by CAI, which acted through its employees, including an employee who had a primary role in creating the funds and serving as the funds’ manager during the relevant time period (the “fund manager”). Respondents raised approximately $2.898 billion from approximately 4,000 investors in ASTA/MAT and Falcon. In 2008, both funds collapsed resulting in billions of dollars in losses. From 2002 through 2008 (the “relevant period”), financial advisers and the fund manager misrepresented the funds’ risks and performance to advisory clients, who were told that the investments were “safe,” “secure,” “low-risk,” “bond substitutes” and suitable for traditional bond investors, despite statements in marketing documents that the funds should not be viewed as a bond substitute.

As alleged in the SEC Complaint, while the risk of principal loss was disclosed in written materials provided to clients, certain financial advisers and the fund manager orally minimized the significant risk of loss resulting from, among other things, significant high-risk aspects of the investments such as the funds’ investment strategy and use of leverage (the borrowing of money to make investments). The biggest risk told investors was ASTA/MAT adoption of a flat income tax by the federal government.  Financial advisers encouraged many of their advisory clients to sell portions of their bond portfolios, their safe holdings, in order to invest in the risky funds. In late 2007, financial advisers and the fund manager continued to offer and sell Falcon as a safe, low-risk investment, even though both funds—the Falcon fund was 20 percent invested in the ASTA/MAT fund—began experiencing increased margin calls and liquidity problems in the second half of 2007 that continued until the funds collapsed.  Moreover, the fund manager was involved in virtually all fund-related communications with the financial advisers and investors. The fund manager and the fund manager’s staff were responsible for drafting and reviewing offering materials for the funds, crafting sales pitches to investors, training CAI sales personnel (who, in turn, were responsible for marketing the funds to the financial advisers), drafting quarterly investor reports, disclosing interim fund performance.

The fund manager and other employees at CAI had significant influence over the information relating to the funds without review or oversight, including information relating to the funds’ risks and performance. CAI failed to ensure that the fund manager’s communications with investors and financial advisers concerning the ASTA/MAT and Falcon funds were accurate and not misleading.


Morgan Stanley, Scottrade Failing to Supervise Transmittals


If you have lost funds due to representative from Morgan Stanley or Scottrade misappropriating your funds, contact 1-866-817-0201. 

NYSE pic 1The Financial Industry Regulatory Authority (FINRA) stated in a release in August 2015 that it fined Morgan Stanley Smith Barney (Morgan Stanley) $650,000 and Scottrade $300,000 for failing to implement reasonable supervisory systems to monitor the transmittal of customer funds to third-party accounts. The two firms were cited for the weak supervisory systems by FINRA examination teams in 2011, but neither took necessary steps to correct the supervisory gaps. Brad Bennett, Executive Vice President and Chief of Enforcement, said, “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.”

With regard to Morgan Stanley, FINRA found that from October 2008 to June 2013, three registered representatives in two different branch offices converted a total of $494,400 from thirteen customers by creating fraudulent wire transfer orders and branch checks from the customers’ accounts to third-party accounts. For example, the representatives moved funds from multiple customer accounts to their own personal bank accounts or to banks that held the representative’s mortgage.

FINRA found that Morgan Stanley failed to implement a reasonable supervisory systems to review and monitor transmittals of customer funds through wire transfers from multiple customer accounts to the same third-party accounts and outside entities.The supervisory failures allowed the conversions to go undetected.

FINRA also found that Scottrade failed to establish a reasonable supervisory system to monitor wires. From October 2011 to October 2013, Scottrade did not obtain any customer confirmations for third-party wire transfers of less than $200,000, and Scottrade failed to ensure that the appropriate personnel obtained confirmations for third-party wire transfers of between $200,000 and $500,000. During that period, the firm processed over 17,000 third-party wire transfers totaling more than $880 million.

Both firms neither admitted or denied the charges, but consented to the entry of FINRA’s findings.


Merrimac Corporate Securities, Inc.

If you lost money as a result of investments or other business dealings with representatives of Merrimac Corporate Securities, Inc. please call 1-866-817-0201. 

In a release by the Financial Industry Regulatory Authority, Merrimac Corporate Securities, Inc. agreed to a $100,000 fine and the requirement to retain an independent consultant to review its policies, systems and procedures (written and otherwise), and training relating to outside business activities and private securities transactions, and adopt and implement the independent consultant’s recommendations. The NAC affirmed the sanctions following the firm’s appeal of an OHO decision, in which the firm argued that it lacked the ability to pay the stipulated fine. The sanctions were based on findings that the firm failed to establish, maintain and enforce reasonable WSPs, and failed to reasonably supervise the outside business activities and private securities transactions of two registered representatives who have since been barred from the industry. The findings stated that the representatives operated a company and sold investments away from the firm. The representatives solicited individuals to invest in their company and raised an aggregate amount of $4 million from those investors. The representatives arranged for investors, many of whom were firm customers, to hold investments in their company away from the firm’s clearing firm with non-broker-dealer custodians. One representative also solicited investments in a second outside business, of which he was an owner. The findings also stated that the firm failed to adequately implement its procedures regarding participation in outside businesses and private securities transactions, and failed to implement reasonable procedures regarding the use of outside custodians. The findings also included that the firm failed to follow up on “red flags” and adequately inquire into the representatives’ outside business activities and involvement in private securities transactions despite personal knowledge.

Municipal Bond Fund Loss

If you are invested in a U.S. municipal bond mutual fund, odds are they’re exposed to Puerto Rico’s deteriorating financial situation. But because the slow-motion train wreck has been chugging along for several years, with the U.S. commonwealth’s government publicly stating its intention to not pay its bond debt, the weekend’s news that Puerto Rico defaulted on its debt wasn’t a surprise.

This means the heightened risk of loss for municipal bond funds has been known for some time.  Like most investments, those with higher risks pay higher commissions to the brokers that sell them.  Recommending such municipal bond funds while failing to disclose this risk or to recommend such funds to someone who is trying to avoid risk is a form of fraud.  You may be entitled to recovery of your losses if you have been recommended such funds.  Please call 1-866-817-0201.


Merrill / RBC Broker Thomas Buck


If you have suffered losses with Merrill Lynch and RBC broker Thomas Buck, please call toll-free 1-866-817-0201 for a free consultation on your chances for recovery.

Mr. Buck had been Merrill’s top broker in Indiana, overseeing $1.3 billion in assets prior to being terminated in March 2015.

The Financial Industry Regulatory Authority Inc. has barred Mr. Buck, from associating with any Finra member firm, according to a posting to the regulator’s website on Tuesday, July 28, 2015.

Mr. Buck has been accused of trading in the accounts of investors without appropriate authorization, recommending unsuitable investments, misleading investors as to the fees for investments made, and charging investors excessive charges for investment services.

In addition to the FINRA action, Thomas Buck has been or is currently the subject at least 11 suits filed by investors.



Oppenheimer Broker Scott Eisler

NYSE pic 1Please call 1-866-817-0201 if you invested with Oppenheimer broker Scott Eisler.

According to the SEC, former Oppenheimer executive, Robert Okin, and a branch manager in the firm’s Boca Raton, Fla., office Arthur Lewis, failed to properly supervise the broker, Scott Eisler, and ignored significant warning signs as Eisler traded some 2.5 billion penny stock shares in illegal unregistered transactions. Mr. Lewis participated in or approved the sales, the SEC confirmed. The sales generated some $12 million in proceeds and $588,400 in commissions for Oppenheimer.

“In the face of red flags that their customer’s stock sales were not exempt from registration, Oppenheimer’s branch personnel allowed these unregistered transactions to occur,” said Andrew J. Ceresney, director of the SEC’s Division of Enforcement. “Okin, one of Oppenheimer’s senior-most executives, also failed to properly supervise by allowing these transactions to occur and failing to respond appropriately to the red flags suggesting violations of the federal securities laws.”

Information for this posting was obtained from